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INTERPRETATION OF STATUTES
PROJECT
Statute: Meaning and Classification
Interpretation: Meaning, Object and Necessity
Bengal Immunity Co. Ltd. Vs. St. Of Bihar
Submitted by: Bharat Jangra
Class: B.A.LL.B. (Hons.)
Section: B
Semester: VI
Roll no. : 61/19
Submitted to: Mr. Agampreet

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 INDEX

S. No. Topic Page No.

1. STATUTE: MEANING AND CLASSIFICATION 2
 Meaning of Statute 2
 Classification of Statutes 2
2. INTERPRETATION: MEANING, OBJECT AND NECESSITY 6
 Meaning of Interpretation 6
 Meaning of Construction 7
 Classification of Interpretation 8
 Object of Interpretation 9
 Necessity of Interpretation 10
 Conclusion 12
3. CASE LAW: BENGAL IMMUNITY CO. LTD. v. ST. OF BIHAR 12
 Facts of the case 13
 Issues raised 14
 Contentions of the Parties 15
 Decision 16
 Conclusion 19
4. REFERENCES 20

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 STATUTE: MEANING AND CLASSIFICATION

MEANING OF STATUTE
A statute is a written law passed by a legislature on the state or federal level. Statutes set forth
general propositions of law that courts apply to specific situations. A statute may forbid
certain act, direct a certain act, make a declaration, or set forth governmental mechanism to
aid society. A statute begins as a bill proposed or sponsored by a legislator. If the bill
survives the legislative committee process and is approved by both the houses of the
legislature, the bill becomes law when it is signed by the executive officer (the President on
the federal level or the Governor on the state level). When a bill becomes law, the various
provisions in the bill are called statutes. The term statute signifies the elevation of a bill from
legislative proposal of law. State and federal statutes are compiled in statutory codes that
group the statutes by subject. These codes are published in book form and available at: law
libraries.
In the case, CST Vs Mangal Sen Shamlal,1 the court observed that a statute is supposed to be
an authentic repository of the legislative will and the function of a court is to interpret it
according to the intent of those that made it. The legislature as the representative of the
people of a nation or the people of the state expresses its will and such expression of the will
in accordance with constitution provision is a statute.
The word "statute" is derived from the Latin verb statuere-"to be made to sit up" (It is from
the root that the words "statute" and status" are derived).2
According to Black’s Law Dictionary, the word “Statute” denotes an act of legislature
declaring,
commanding or prohibiting something i.e., the written will of legislature. Solemnly expressed
according to the forms necessary to constitute it, the law of the state, may be declaratory or
mandatory in nature. A statute has been made taking into consideration of matters like
promotion of public justice, social gain, public policy, humanist consideration and the
legislature tries its best to avoid any length of litigation regarding its intention.
CLASSIFICATION OF STATUTES
Statutes can be classified according to different criteria. Some of these are as follows:

1. Classification by object –  

a. Declaratory Statutes – Declaratory Statute may be defined as an Act to remove doubts

existing as to the common law, or the meaning or effect of any Statute such Acts are held
to be retrospective. This may happen for, instance, where the courts have been

1
AIR 1975(4) SCC 35
2
P.M. Bakshi, Interpretation of Statutes 25 (Orient Pub., New Delhi, 2008)

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 interpreting a particular expression as connoting a specific meaning which in the opinion
of the legislature is a wrong notion of the expression. In such case, the legislature may
pass a declaratory statute declaring the correct meaning of that expression thereby setting
aside the controversy regarding the correct meaning of the expression. It is enacted for the
purpose of removing doubts, clarifying and improving the law based on the interpretation
given by the court, which might not be suitable from the point of view of the parliament.
For example- the definition of house property has been amended under the Income Tax
(Amendment) Act, 1985 through the judgement of the supreme court.

b. Explanatory statutes – The term explanatory itself indicates that this type of statute
explains the law and rectifies any omission left earlier in the enactment of the statutes.
Further, ambiguities in the text are also clarified and checked upon the previous statutes.

c. Codifying Statutes – A Codifying Statute is a Statute which presents a detail

authoritative statement of the rules of law on a given subject. The object is not merely to
declare the law upon some particular subject but to declare it in the form of code. The
purpose of this kind of statute is to give an authoritative statement of the rules of the law
on a particular subject, which is customary laws.
Example –  Civil Procedure Code 1908,  The Hindu Marriage Act 195 The Hindu
Succession act 19556.

d. Consolidating Statutes – Consolidating Statute it is a Statute which presents the whole

body of statutory law on the subject in complete form repealing the former Statute. It is a
Statute which consolidated laws on a particular subject at one place. The main purpose of
the consolidating statute is to present the whole body of statutory law on a subject in
complete form repealing the former statute. This kind of statute covers and combines all
law on a particular subject at one place which was scattered and lying at different places.
Example – Arbitration and conciliation act 1996

e. Remedial statute – Remedial Statutes are those statutes which provide the remedy for a
wrongful act in the form of damages or compensation to the aggrieved party but do not
make a wrongdoer liable for any penalty.  This types of Statute are beneficial to the
weaker section of the society. Granting of new remedies for enforcing one’s rights can be
done through the remedial statutes. The purpose of these kinds of statutes is to promote
the general welfare for bringing social reforms through the system. These statutes have
liberal interpretation and thus, are not interpreted through strict means. For example- The
Maternity Benefits Act, 1961, The Workmen’s Compensation Act, 1923, Consumer
Protection Act 1986, Industrial Dispute Act 1947.

f. Curative statute – Through these statutes, certain acts which would otherwise be illegal
are validated by curing the illegality and enables a particular line of action.

g. Enabling statute –  Enabling statute is a Statute Which enables something to be done. It

basically gives the power to do something. According to Craies, “many statutes have been

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 passed to enable something to be done which was previously forbidden by law, with or
without prescribing the way it is to be done.”
The purpose of this statute is to enlarge a particular common law. For example- Land
Acquisition Act enables the government to acquire the public property for the purpose of
the public, which is otherwise not permissible.

h. Disabling statutes – It is the opposite of what is provided under the enabling statute.
Here the rights conferred by common law are being cut down and are being restrained.

i. Amending Statutes – The statutes which operate to make changes in the provisions of
the enactment to change the original law for making an improvement therein and for
carrying out the provisions effectively for which the original law was passed are referred
to as amending statutes. For example- Code of Criminal Procedure 1973 amended the
code of 1898.
A law is amended when it is in whole or in part permitted to remain and something is
added to or taken away from it or it is some way changed or altered to make it more
complete or perfect or make it suitable to accomplish the purpose for which it was made.

j. Repealing Statutes – A repealing statute is one which terminates an earlier statute and
may be done in the express or explicit language of the statute. For example- Competition
Act, 2002 repealed the MRTP Act.

k. Taxing Statutes –  A taxing statute provides for the imposition of taxes. Tax is a form of
revenue which is to be paid to the government. It can either be on income that an
individual earns or on any other transaction. A taxing statute thus, levies taxes on all such
transactions. There can be income tax, wealth tax, sales tax, gift tax, etc. Therefore, a tax
can be levied only when it has been specifically expressed and provided by any statute. A
taxing statute is to be strictly construed.
According to Lord Halsbury and Lord Simonds,  “The subject is not to be taxed without
clear words for that purpose; and also that every Act of Parliament must be read
according to the natural construction of its words.”

l. Penal Statutes – A penal statute is one which punishes certain acts or wrong.  Such
Statute may be in the form of a comprehensive criminal code or large number of sections
providing punishment for different wrongs for example – Criminal Procedure Code,
Indian Penal Code etc. The penalty for disobedience may be in the form of fine, forfeiture
of property, imprisonment, death sentence etc. These provisions have to be imposed
strictly.

2. Classification by method

a. Mandatory Statute – A Mandatory statute may be defined as one whose provisions or
requirements, if not complied with, will render the proceedings to which it relates illegal
and void.

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b. Directory Statute – A directory statute is one where noncompliance will not invalidate
the proceedings to which it relates. It permits the doing of some act but doesn’t impose
any penalty if not complied with.
In, Chandrika Prasad Yadav vs. State of Bihar,3 the court stated that the question of
whether a statute is mandatory or directory would depend upon the purpose and object it
seeks to achieve.   

3. Classification by reference to duration

a. Temporary Statute – This type of statutes are Statutes which are in existence for a
known Period such Statutes are called Temporary Statute. Life period of Statute is Fixed. 
In simple words this type of Statute, the period of operation is fixed by the statute itself
the statute is temporary in nature. Such an Act continues in force, unless repealed earlier,
until the time so fixed. After the expiry of the Act, if the legislature wishes to continue it,
a new enactment is required. The Finance Act is a temporary Act and is required to be
passed every year.

b. Permanent/ Perpetual Statute – When no time period is fixed the statute is permanent
in nature.  The dictionary meaning of the term ‘perpetual’ is forever.  Therefore perpetual
Statutes are those which remain in force forever.
These Statutes comes to an end only when they are abolished by the legislature itself by
way of enacting another Statute. 

4. Classification on the basis of contents of statutes

a. Substantive statutes – It deals with the substantive law, especially with the creation and
cutting down of rights and duties. Example- transfer of property act.

b. Procedural/adjective statutes – It deals with the procedure followed in case of

infringement of rights and duties as contained in the substantive law. Example- Indian
Evidence Act, 1872.

5. Classification with reference to the effect

a. Statutes with immediate effect – It becomes effective soon after coming into existence.

b. Retroactive statute – It operates from some past date and had regulated the acts of the
past. 

3
Criminal Appeal No. 296 of 2008

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c. Retrospective statute – As the name itself suggests, the retrospective statute operates
though from the future date but takes away the vested rights and creates a new law with
respect to actions of the past. 

d. Prospective statute – It regulates the acts and transactions which will occur in the future.
In other words, prospective statutes do not start operating immediately after it comes into
effect but operates on the acts in the future.

6. Classification with reference to extent of application

a. Local statute – It applies to specified locality.

b. General statute – It is applicable throughout the state or to all individuals of the state.

c. Special statute – It is applicable to some specific classes of individuals within a state.   

7. Classification on the basis of subject matter

a. Public statutes – It regulates the collective rights of the society as a whole.

b. Private statutes – It regulates the duties and ensures the rights of an individual in society.

INTERPRETATION: MEANING, OBJECT AND NECESSITY

Interpretation is the primary function of a court. The court interprets the will of the legislature
whenever a dispute comes before it. Since the will of the legislature is expressed generally in
the form of a statute, the prime concern of the court is to find out the intention of the
legislature in the language used by the legislature in the statute.4
MEANING OF INTERPRETATION
The term ‘interpretation’ has been derived from the Latin term ‘interpretari’, which means to
explain, expound, understand, or to translate. Interpretation is the process of explaining,
expounding and translating any text or anything in written form. This basically involves an
act of discovering the true meaning of the language which has been used in the statute.
Interpretation is the process by which the Courts seek to ascertain the meaning of the
legislation through the medium of authoritative forms in which it is expressed.5
Simply stated, ‘interpretation’ is the process by which the real meaning of an Act (or a
document) and the intention of the legislature in enacting it (or of the parties executing the
document) is ascertained. ‘Interpretation’ signifies expounding the meaning of abstruse

4
T. Bhattacharyya, The Interpretation of Statutes 1 (Central Law Agency, Allahabad, 2020)
5
Salmond's Jurisprudence p. 152

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words, writings, etc., making out of their meaning, explaining, understanding them in a
specified manner. A person is there by aided in arguing, contesting and interpreting the
proper significance of a section, a proviso, explanation or schedule to an Act or any
document, deed or instrument.
According to Salmond, “Interpretation” is the process by which the court seeks to ascertain
the meaning of the legislature through the medium of authoritative forms in which it is
expressed.”
Interpretation of statutes is the correct understanding of the law. This process is commonly
adopted by the courts for determining the exact intention of the legislature. Because the
objective of the court is not only merely to read the law but is also to apply it in a meaningful
manner to suit from case to case. It is also used for ascertaining the actual connotation of any
Act or document with the actual intention of the legislature.

MEANING OF CONSTRUCTION
While more often the two terms are used interchangeably to denote a process adopted by the
courts to ascertain the meaning of the legislative form in which it is expressed, these two
terms have different connotations.
In simple words, construction is the process of drawing conclusions of the subjects which are
beyond the direct expression of the text. The courts draw findings after analysing the
meaning of the words used in the text or the statutes. This process is known as legal
exposition. There are a certain set of facts pending before the court and construction is the
application of the conclusion of these facts.
The objective is to assist the judicial body in determining the real intention of the legislature.
Its aim is also to ascertain the legal effect of the legal text.
The cardinal rule of construction of a statute is to read it literally, which means by giving to
the words used by the legislature their ordinary, natural and grammatical meaning. If such
reading leads to absurdity and the words are susceptible of another meaning, the court may
adopt the same. If no such alternative construction is possible, the court must adopt the
ordinary rules of literal interpretation.
Whereas cardinal law of interpretation is that if the language is simple and unambiguous, it is
to be read with the clear intention of the legislation.6
For the purpose of construction of a statute the same has to be read as a whole.7

Difference between Interpretation and Construction

In Bhagwati Prasad Kedia v. C.I.T,8 it was held that interpretation differs from construction.
Interpretation is of finding out the true sense of any form and the construction is the drawing
of conclusion respecting subjects that lie beyond the direct expression of the text.
In State of Madras v. Gannon Dunkerly Co.,9 the court held that it is the duty of the courts to
give effect to the meaning of an Act when the meaning can be equitably gathered from the

6
CWT v. Smt. Muthu Zulaika(2000)
7
State of Bihar v. CIT, (1993) 202 ITR 535, 550 (Pat)
8
2001 248 ITR 562 Cal
9
AIR 1954 Mad 130

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words used. Words of legal import occurring in a statute which have acquired a definite and
precise sense, must be understood in that sense.
When the legislature uses certain words which have acquired a definite meaning over a
period of time, it must be assumed that those words have been used in the same sense.
Thus, where the Court adheres to the plain meaning of the language used by the legislature, it
would be ‘interpretation’ of the words, but where the meaning is not plain, the court has to
decide whether the wording was meant to cover the situation before the court. Here the court
would be resorting to what is called ‘construction’, however, the two terms – ‘interpretation’
and ‘construction' – overlap each other and it’s rather difficult to state where ‘interpretation’
leaves off and ‘construction’ begins.

Interpretation
In law, interpretation refers to exposing the
true sense of the provisions of the statutes
and to understand the exact meaning of the
words used in any text.
Construction
Construction, on the other hand, refers to
drawing conclusions from the written texts
which are beyond the outright expression of
the legal text.

Interpretation refers to the linguistic The purpose of construction is to determine

meaning of the legal text. the legal effect of words and the written text
of the statute.
In the case where the simple meaning of the In the case where the literal meaning of the
text is to be adopted then the concept of legal text results in ambiguity then the
interpretation is being referred to. concept of construction is adopted.

CLASSIFICATION OF INTERPRETATION

Jolowicz, in his Lectures on Jurisprudence (1963 ed., p. 280) has classified interpretation as
follows:
1. Legal interpretation: Interpretation is ‘legal’ when there is an actual rule of law which
binds the Judge to place a certain interpretation of the statute. Legal’ interpretation is sub-
divided into ‘authentic’ and ‘usual’.
a. Authentic – It is ‘authentic’ when rule of interpretation is derived from the
legislator himself.
b. Usual – it is ‘usual’ when it comes from some other source such as custom or case
law.
2. Doctrinal Interpretation: It is ‘doctrinal’ when its purpose is to discover ‘real’ and
‘true’ meaning of the statute. ‘Doctrinal’ interpretation may again be divided into two
categories: ‘grammatical’ & ‘logical’.
a. Grammatical – It is ‘grammatical’ when the court applies only the ordinary rules
of speech for finding out the meaning of the words used in the statute.
‘Grammatical interpretation’ concerns itself exclusively with the verbal
expression of the law: it does not go beyond the letter of the law.

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 b. Logical – when the court goes beyond the words and tries to discover the
intention of the statute in some other way, then it is said resort to what is called a
‘logical’ interpretation. It seeks a satisfactory evidence of the true intention of the
legislature

According to Fitzerald, interpretation is of two kinds –

1. Literal Interpretation: The literal interpretation is that which regards conclusively the
verbal expression of the law. It does not look beyond the ‘literaligis’. The duty of the
Court is to ascertain the intention of the legislature and seek for that intent in every
legitimate way, but first of all in the words and the language employed.
2. Functional Interpretation: ‘Functional’ interpretation, on the other hand, is that which
departs from the letter of the law and seeks elsewhere for some other and more
satisfactory evidence of the true intention of the legislature. In other words, it is necessary
to determine the relative claims of the letters and the spirit of the enacted law.

OBJECT OF INTERPRETATION
The object of interpretation is to discover what the Legislature intended. This intention is to
be ascertained from the text of enactment. It is presumed that the Legislature speaks its mind
by use of correct expressions and therefore, unless there is an ambiguity in the words used in
the language, grammatical sense. When the language of a provision is clear, it should not be
twisted or strained to arrive at a "supposed intention". The words used in the provisions
should be read and understood in their the provision should be assigned their plain and
ordinary meaning and then the language should be understood in its literal sense. If the results
drawn are absurd, then the courts should look for some other "logical" meaning of those
words to remove the ambiguity and absurdity. The idea behind this is that the Legislature is
not expected to have used the words capable of bearing more than one meaning, so as to lead
to alternative constructions, but if such a situation arises, then the construction which
advances the policy of the enactment must be upheld.10
A statute is an edict of the Legislature and the conventional way of interpreting or construing
a statute is to seek the intention' of its maker. A statute is to be construed according "to the
intent of them that make it” and "the duty of judicature is to act upon the true intention of the
Legislature-the mens or sententia legis".11
According to BLACKSTONE the most fair and rational method for interpreting a statute is
by exploring the intention of the Legislature through the most natural and probable signs
which are "either the words, the context, the subject-matter, the effects and consequence, or
the spirit and reason of the law."12

10
D.N. Mathur, Interpretation of Statutes 25 (Central Law Publications, Allahabad, 2021)
11
G.P. Singh, Principles of Statutory Interpretation 3 (Wadhwa and Co., New Delhi, 2017)
12
Id. At 17

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Thus, the object and purpose of all constructions or interpretations is to ascertain the
intention of the law-makers and make it effective. Crawford, quoting from a series of
decisions, stated that "the basic principle has been announced time after time that if the
statute is plain, certain and free from ambiguity, a bare reading suffices and interpretation is
unnecessary. It is only when the statute is ambiguous or its meaning is uncertain that
interpretation is required in order to ascertain what the Legislature meant". The caution in this
regard is that in the endeavor to discover the intention of the law-maker, the Court shall not
rewrite a statute and shall not exercise a sort of legislative power which the Court does not
have.
NECESSITY OF INTERPRETATION
It would be worthwhile to note what Denning L.J. has said on the need for statutory
interpretation:
“It is not within human powers to foresee the manifold sets of facts which may arise; and
that, even if it were, it is not possible to provide for them in terms free from all ambiguity.
The English language is not an instrument of mathematical precision. Our literature would be
much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been
unfairly criticized. A judge, believing himself to be fettered by the supposed rule that he must
look to the language and nothing else, laments that the draftsmen have not provided for this
or that, or have been guilty of some or other ambiguity. It would certainly save the judges’
trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the
absence of it, when a defect appears, a judge can not simply fold his hands and blame the
draftsman. He must set to work on the constructive task of finding the intention of
Parliament, and he must do this, not only from the language of the statute, but also from a
consideration of the social conditions which gave rise to it, and of the mischief which it was
passed to remedy, and then he must supplement the written word so as to give ‘force and life’
to the intention of the legislature.”
The need for interpretation arises principally in three situations:
(a) The Legislature has used words which turn out to be indefinite.
(b) The Legislature has used words which are in conflict with each other
(c) The Legislature has left its intention unexpressed.13
These points may be elaborated as follows:
1. When the language is ambiguous
No doubt in modern times, the enacted laws are drafted by legal experts, yet they are
expressed in language and no language is so perfect as to leave no ambiguities.
Ambiguities arise when –
i. firstly, where the letter of the law is logically defective on account of ambiguity,
inconsistency or incompleteness. As regard the defect to ambiguity, the Court is under
a duty to travel beyond the letter of the law so as to determine from the other sources

13
Supra 2 at 23

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 the true intention of the legislature. In the case of the statutory expression being
defective on account of inconsistency, the court must ascertain the spirit of the law.
ii. Secondly, if the text leads to a result which is so unreasonable that it is self-evident
that the legislature could not mean what it says, the court may resolve such impasse
by inferring logically the intention of the legislature.

2. When the intention of the legislature is not clear

Further, by its very nature, a statute is an edict of the legislature and many-a-time the
intent of the legislature has to be gathered not only from the language but the
surrounding circumstances that prevailed at the time when that particular law was
enacted. If any provision of the statute is open to two interpretations, the Court has to
choose that interpretation which represents the true intention of the legislature.
The fundamental rule of interpretation of a statute is that it should be expounded
according to the intent of those that made it. In the event of the words of the statute
being precise and unambiguous in themselves it is only just necessary to expound
those words in their natural and ordinary sense: thus far and no further. This is
because these words distinctly indicate the intention of the legislature. The purpose of
interpretation is to discern the intention which is conveyed either expressly or
impliedly by the language used. If the intention is express, then the task becomes one
of ‘verbal construction’ alone. But in the absence of any intention being expressed by
the statute on the question to which it gives rise and yet some intention has to be, of
necessity, imputed to the legislature regarding it, then the interpreter has to determine
it by inference based on certain legal principles. In such a case, the interpretation has
to be one which is commensurate with the public benefit.

3. Subsequent developments
Also, it is not within human powers to foresee the manifold set of facts which may
arise in the future and even if it were so it is not possible to provide for them in terms
free from all ambiguity. Thus, there might be subsequent developments which change
the context in which the low was enacted and their for make it necessary to give an
interpretation to the low which can make it suitable for the prevailing conditions.
In Keshavji Rauji & Co. v. C.I.T,14 the Apex court observed that as long as there is no
ambiguity in the statutory language, resort to any interpretative process to unfold the
legislative intent cannot then be applied to whittle down the statutory language which is
otherwise unambiguous. Ifvthe intendment is not in the words used, it is nowhere else. The
need of interpretation arises when the words used in the statute are on their owb terms,
ambivalent and do not manifest the intention of legislature.
In Pandian Chemicals Ltd. v. C.I.T,15 the said question has been answered by Supreme Court
by holding that the rules of interpretation would come into play only if there is any doubt
with regard to the express language used. Where the words are unequivocal, there is no scope
for importing any rule of interpretation.
14
(1990) 2 SCC 231
15
(2003) 5 SCC 590

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In Tata Consultancy Services v. State of A.P,16t he Supreme Court observed that it is
furthermore trite that a court should not be overzealous in searching ambiguities or
obscurities in words which are plain.
In Executive Engineer No. 4 BRLBC Division, Shimoga v. Lokesh Reddy,17 the Division
Bench of Karnataka High Court held that such necessity arises, if words in a statute are
susceptible to more than one construction. In case of plain words there is no necessity to
invoke any rule to ascertain legislative intent.
CONCLUSION
Interpretation, thus, is a familiar process of considerable significance. In relation to statute
law, interpretation is of importance because of the inherent nature of legislation as a source of
law. The process of statute making and the process of interpretation of statutes take place
separately from each other, and two different agencies are concerned. An interpretation of
Act serves as the bridge of understanding between the two.
Judicial determination of questions of law requires the use of materials of various types,
depending on the nature of the question. In the interpretation of statutory provisions the
material used will naturally have a sharply legal character, as distinct from the application of
a general common law doctrine where it may have a more diffused character. In statutes,
greater accuracy is, therefore, required. The process of interpretation is more legalistic and
makes more intensive use of the legal technique in statutory interpretation, as contrasted with
the application of common law rules.
All these aspects add to give great prominence to the subject of interpretation and
construction in the practical administration of the law.

CASE LAW

Bengal Immunity Co. Ltd. v. the State of Bihar

Citation: AIR 1955 SC 661

Date of judgment: 06/09/1955
Petitioner: Bengal Immunity Co. Ltd.
Respondent: State of Bihar and others
Bench: Justice S.R. Das, Justice V. Bose, Justice Bhagwati, Justice Jagannath Das, Justice
T.L.V. Ayyar, Justice B.P. Sinha and Justice S.J. Imam
The present case is a landmark case where the Supreme Court applied the Mischief rule of
interpretation for interpreting the Bengal Finance (Sales Tax) Act, 1941 along with Article
286 of the Constitution.

16
(2005)1 SCC 308
17
2003 J1I CLR 126 (Karnataka High Court) (D.B.).

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FACTS OF THE CASE

In this case, the appellant is a company engaged in manufacturing and selling of biological
products and medicines, having its registered head office at Calcutta and its laboratory and
factory situated in West Bengal. The products of the company are sold throughout the Union
of India and abroad as well.

It does not have any office, godown, laboratory or any agent or manager in Bihar. However,
on the 24th October 1951, the appellant company received a letter from the Assistant
Superintendent of Commercial Taxes, Bihar wherein the company was called upon to take
necessary steps to get itself registered under the Bihar Sales Tax Act, 1947 and to deposit
Bihar Sales Tax dues as well.

Then, on 18th December 1951, a notice was issued to the appellant company by the
Superintendent, Commercial Taxes, Central Circle Bihar, Patna issued a notice under Section
13(5) of the Bihar Sales Tax Act, 1947 read with Rule 28. It was mentioned in the notice that
the appellant company is to register itself under the Bihar Sales Tax Act and submit returns
showing its turnover for a certain period as mentioned therein. It was the view of the
authorities that the appellant company was liable to pay tax but was willfully avoiding its
obligation to register itself under the Act. 

The appellant company denied its liability to pay tax on the following grounds-

 That it was not resident in Bihar

 That is carried on no business in Bihar and none of its sales took place in Bihar and
 That it did not collect any sales tax from any person of that State.

It was contended by the Bihar Sales Tax authorities that under Section 33 of the aforesaid
Act, which was substantially based on Article 286 of the Constitution, provided for all sales
in West Bengal or any other State under which the goods had been delivered in the State of
Bihar as a direct result of the sale for consumption in that State were liable to Bihar Sales
Tax.

On 29 May 1952, the appellant company was called upon to comply with the notice by 14
June 1952, and it was mentioned that in default of compliance, the Assistant Superintendent
of Sales Tax, Bihar would proceed to assess the best of his judgment. 

By a letter dated 7th June 1952, the appellant company characterized the notice under Section
13 (5) as ultra vires, illegal and called upon the Superintendent to cancel the same.

On 10th June 1952, the appellant company presented a petition under Article 226  before the
Patna High Court praying for an order quashing the proceedings issued by the opposite
parties with the object of levying and realizing a tax which is not lawfully leviable on the
petitioners and for other ancillary reliefs.

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The respondents did not file any affidavits controverting any facts mentioned in the petition
of the appellant company. A preliminary objection was raised by the respondents before the
High Court regarding the maintainability of the petition.

Decision of the High Court

The High Court disposed of the preliminary objection in favour of the respondents and held
that-

1. Under the Act, the Sales Tax Officer has the jurisdiction to investigate the question of
liability of a dealer to sales tax and hence the officer was well within his jurisdiction in
issuing the notice. 
2. The court pointed out that if an order of liability to pay tax is erroneously made against
the company, then the company has the remedy to file an appeal under Sections 24 and
25 of the Act. The High Court adopted the view that such a decision, however
erroneous, is well within the ambit of jurisdiction of such officer and the High Court
cannot interfere in the same by a writ of prohibition or certiorari. 
3. The Bihar Sales Tax Act is not violative of Article 286.  The Bihar Sales Tax Act is not
invalid under Article 254 and does not contravene Article 304.

Hence, the petition was dismissed as being not maintainable.

However, the High Court issued a certificate, under Article 132(1) of the Constitution
certifying that the case involved a substantial question of law as to the interpretation of the
Constitution. The company came in appeal before the Hon’ble Supreme Court.

ISSUES RAISED
Some of the important legal issues raised in the case are as follows:

1. Whether the application for a writ of prohibition is maintainable?

2. Whether the tax threatened to be levied on the sales made by the appellant
company and implemented by delivery in the circumstances and manner
mentioned in its petition is leviable by the State of Bihar?
3. Whether the explanation to Article 286(1)(a) confers authority on the State
Legislatures to impose a tax on sales falling within its purview?
4. Whether the Supreme Court can review/re-examine its earlier decision?
5. Whether the Bihar Sales Tax Act, 1947 is ultra-vires and void in its entirety
or it is only bad in so far as it seeks to impose a sales tax on out-of-State
sellers in respect of inter-state sales or purchases?

CONTENTIONS OF THE PARTIES

Submissions made by the appellants

 It was submitted on the behalf of the appellants that the Bihar Sales Tax Act is ultra-
vires, wholly illegal and in contravention of Article 286 of the Constitution to the extent

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 that it proposes to tax a  non-resident dealer with regard to an inter-State sale or purchase
of goods.  
 It was urged that Article 286 puts a restriction on the State legislature and the explanation
appended to the said section only explains clause 1(a) and did not confer any power on
the state legislature to impose the tax.
 Article 286(2) establishes the supremacy of Parliament with regard to inter-state trade and
commerce by restricting the state legislature to tax such inter-state trade. It is only when
such an embargo is lifted by appropriate legislation made by the Parliament that the State
Legislature could levy any tax on inter-state trade. 

Submissions made by the respondent

 It was argued on the behalf of respondents that the application praying for a writ filed by
the appellant company was premature and was liable to be dismissed as no order of
assessment has in fact been made. The appellant should not have rushed to the court at
this stage and moreover, it was not entitled to come to court under Article 226 as it has
the alternative and adequate remedy of appeal and revision under the Act. 
 Respondents relied on the case of The State of Bombay v. The United Motors (India)
Ltd (1953) to support the contention that all the States are realizing sales tax in respect of
sales or purchases of goods where the goods are delivered for consumption within their
respective boundaries. It was also submitted that a reversal of the said decision by this
court will upset the economy and render them liable to refund monies already collected
by them as taxes. 
 Following reasons were given by the Government of Bihar in support of their contention
that Article 286(2) is not applicable to the transactions of sale or purchase covered by
Article 286(1)(a) and the explanation thereto-

1. Sales falling under Article 286(1)(a) form a special class of inter-State sales which
are not affected by the general provisions of Article 286(2);
2. If Article 286(2) is made applicable to the sales covered by Article 286(1)(a) and
the Explanation thereto, it would amount to discriminating against the local trade in
favour of inter-State trade;
3. The object of Article 286 is merely to eliminate multiple taxations and when such
an object is already achieved by Article 286(1)(a) in respect of the sales falling
within it, then it need not apply to Article 286(2) as well.
4. The Constitution has divided inter-State sales into two categories. In the case of one
class, it lays down as to which State will tax and under what conditions and in the
case of the other class, the Constitution has banned the imposition of tax in general
terms. 
5. By legal fiction, the inter-State sale is converted into an intrastate sale.

DECISION OF THE HON’BLE SUPREME COURT

The Supreme Court allowed the appeal. It was held that until Parliament by law provides
otherwise, the State of Bihar shall abstain from imposing sales tax on out of state dealers in

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respect of sales or purchases that have taken place in the course of inter-State trade or
commerce even though the goods have been delivered as a direct result of such sales or
purchases for consumption in Bihar.

1. Whether the application for a writ of prohibition is maintainable?

The Supreme Court said that if the contention of the appellant that the Bihar Sales Tax Act
which authorizes levy and collection of sales tax is ultra-vires the Constitution is well-
founded, then the remedy by way of the writ shall be available to the aggrieved party. The
Court rejected the contention of respondents that the appellants should not have come to
Court at the stage of issuing of notice and held that the issuing of notice and calling upon the
appellant company to register itself as a dealer, submit returns etc. constitutes hardship and
harassment to the appellant which, if the Act is void and ultra-vires constitutes an
infringement of right entitling the company to immediately come to the court for redress. 

Court also rejected the contention of respondents regarding the non-maintainability of the
appellant’s application on grounds of the availability of an alternative remedy under the Act.
The court held that if the Act itself is found to be void or ultra-vires, then the remedy cannot
be said to be adequate and is in fact useless. 

Thus, while rejecting the order of the High Court that the application under Article 226 was
misconceived or not maintainable, the Supreme Court court proceeded to consider the said
question on merits. 

2. Whether the Supreme Court can review/re-examine its earlier decision?

In this case, the Court decided the question as to whether it could re-examine its own decision
given in an earlier case.

The judgment with regard to which this question was The State of Bombay v. The United
Motors (India) Ltd.  (1953). In that case, it was held that Article 286(1)(a), read with the
explanation thereto and construed in the light of Articles 301 and 304, prohibited the levy of
tax on inter-state sales or purchases by all States except the State in which the goods were
actually delivered for the purpose of consumption (hereinafter called delivery state). It was
further held that Article 286(2) did not affect the power of the delivery State to impose a tax
on the sales or purchases of the kind mentioned in the Explanation and that the Explanation
had the effect of converting such inter-State transactions into intrastate transactions and
thereby excluded them from the purview of Article 268(2). 

The Court held that there is nothing in our Constitution that prevents this court from
departing from a previous decision when the court is convinced that such decision is
erroneous and has a baneful effect on the general interests of the public. The Court held
that Article 141 which lays down that the law declared by this Court shall be binding on all
courts within the territory of India refers to Courts other than the Supreme Court. . 

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Thus, the Court held that it could very well re-examine its earlier decision if it is plainly
erroneous. However, such power of review is to be exercised with due care and caution only
for advancing the well being of the general public. The court should not lightly dissent from
its previous pronouncement. The court also said that the doctrine of stare decisis is not a
rigid, inflexible rule of law and cannot become an excuse to perpetuate an error to the
detriment of the general public.

The Court rejected the argument of respondents that doing so would upset the economy and
would require states to refund taxes already collected. It was observed that if those monies
are refundable in law, then the states cannot complain any more than a private individual
placed in similar circumstances. And if the State economy is upset, the States are free to
appeal to the Parliament for the enactment of a suitable law under Article 286(2).

3. Whether the tax threatened to be levied on the sales made by the appellant
company and implemented by delivery in the circumstances and manner
mentioned in its petition is leviable by the State of Bihar?

The Supreme court applied the Heydon's rule for the construction of Article 286.

The Court held that the rule of mischief as propounded in the famous Heydon’s
Case(1584)  is applicable to the construction of Article 286. In that case, it was held that the
following four factors are to be considered for arriving at the true construction of a statute-

1. What was the common law before the making of the Act;
2. What was the mischief and defect for which the common law did not provide;
3. What remedy the Parliament has resolved and appointed to cure the disease of the
Commonwealth., 
4. The true reason of the remedy; and

then the Court has to adopt such construction which shall suppress the mischief, and
advance the remedy…”.

The Court thus proceeded to analyse the position that existed before the enactment of the
Constitution, what was the mischief that the old law did not provide and what remedy was
provided by the Constitution to cure that mischief.

The Court referred to the judgment of United Motors to explain the position of levy of sales
tax that prevailed in the country. In that case, it was said that while exercising the power
conferred under the Government of India Act,1935, the Provincial Legislatures enacted Sales
Tax laws to impose sales tax based on the principle of territorial nexus i.e. they picked up one
of the ingredients constituting a sale(for example,  agreement to sell, delivery of goods etc.)
and made them a basis of their sales tax legislation.  

The aforesaid situation led to multiple taxations of the same transaction by provinces and the
cumulative burden on the consuming public. It was to cure this mischief of multiple taxations

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and also preserve the free flow of inter-State trade or commerce in the Union of India that the
Constitution makers adopted Article 286 in the Constitution. 

Marginal notes as an aid to construction

The Court held that the marginal note appended to Article 286 i.e. “Restrictions as to the
imposition of tax on the sale or purchase of goods”  being a part of the Constitution as passed
by the Constituent assembly prima facie furnishes a clue as to the meaning and purpose of the
Article. 

Thus, the Court held that the marginal note, as well as the language of the article, makes it
clear that the object of the said article is to impose restriction on the legislative powers of the
States with respect to the imposition of tax on sales and purchases of goods. 

Hence, the majority decision given in United Motors judgment was set aside. 

4. Whether the explanation to Article 286(1)(a) confers authority on the State

Legislatures to impose a tax on sales falling within its purview?

While rejecting the contentions put forward by the Government of Bihar, the court held that
the ban under Article 286(2) applies to the transactions of sale or purchase under Article
286(1)(a) and the explanation thereto. The Court also said that—

1. The transactions of sale covered by Article 286(1) (a) and the explanation thereto and the
transactions of sale covered by Article 286(2) do not fall under the same category. The
Court observed that in the former provision, the transaction is looked at from the point of
view of its location, whereas in the latter the transaction is looked at from the point of
view of its being in the course of inter-State trade. Hence, the provisions do not deal with
the same subject matters and therefore the question of construing them harmoniously does
not arise.
2. The purpose of enacting Article 286 was manifold and not merely to avoid multiple
taxations. 
3. The legal fiction created by the Explanation to Article 286(1)(a) is only for the purpose of
sub-clause (a), i.e., for determining whether a particular sale was an outside sale or one
which could be deemed to have taken place inside the State. The said legal fiction cannot
be extended to convert interstate sales into intra-state sales.

Explanation is a part of section

It was also urged before the Court that the Explanation to Article 286(1) (a) should be read as
an exception or a proviso to Article 286(2). While rejecting this argument, the Court held that
the explanation is a part of the Section to which it is appended and the whole lot should be
read together to know the true meaning of the provision.

5. Whether the Bihar Sales Tax Act, 1947 is ultra-vires and void in its entirety or it
is only bad in so far as it seeks to impose a sales tax on out-of-State sellers in
respect of inter-state sales or purchases?

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After declaring that the State cannot impose sales tax on inter-state sale and purchase as
aforesaid, the Court proceeded to analyse the question as to whether the Bihar Sales Tax Act
1947 is wholly void or is void only to the extent that it provides for taxing of inter-state sales
or purchases. 

The court observed that the answer to this question shall depend on whether the objectionable
parts of the Act are severable from the rest of its provisions. For doing so, the Court referred
to some of the provisions of the Act including the long title of the act, its preamble and
Definition of ‘dealer’ under Section 2(c). Apart from these provisions, the Court analysed
Section 4(the charging section) and Section 2(g) of the Act defining ‘sale’.

The Court noted that the explanation to the above provision was substantially a reproduction
of the explanation to Article 286(1)(a). 

In the definition of sale, the words ‘in Bihar’ were deleted by amendment and a new Section
was inserted by the Adaptation of Laws (Third Amendment) Order, 1951 which substantially
reproduced the provisions of Article 286(1) and (2). The court observed that even though the
charging section read with the definition of “dealer” and “sale” may be wide enough to cover
inter-State sales, the new Section 33 makes all those provisions subject to its provisions
which are nothing but a reproduction of the corresponding provisions of Article 286.

Thus, in view of the interpretation as put upon Article 286 by the Court(as stated in above
points), the Court held that the Act insofar as it purports to tax inter-state sales and purchases
is ultra-vires. However, the court concluded that the Act is not wholly ultra-vires as it is
feasible to separate taxes levied on authorised subjects from those levied on exempted
subjects and to exclude the latter in the assessment of tax. 

CONCLUSION
The Bengal Immunity Co. case is a landmark judgment wherein the rule of mischief or
purposive construction was applied by the Hon’ble Supreme Court. The case also highlights
the importance of marginal notes and explanation appended to a statutory provision in
construing the true meaning and import of that provision. However, it must be noted only
those marginal notes should be relied upon as an aid to construction that is inserted by the
Legislature/Constituent Assembly and is thus a part of the enactment.

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REFERENCES

 Books referred:
 P.M. Bakshi, Interpretation of Statutes (Orient Pub., New Delhi, 2008)
 D.N. Mathur, Interpretation of Statutes (Central Law Publications, Allahabad, 2021)
 G.P. Singh, Principles of Statutory Interpretation (Wadhwa and Co., New Delhi,
2017)
 T. Bhattacharyya, The Interpretation of Statutes (Central Law Agency, Allahabad,
2020)
 Websites referred:
 Classification of Statutes, available at: https://www.taxmanagementindia.com
(Last visited on May 22, 2022).
 Classification And General Principles Of Interpretation, available at:
https://blog.ipleaders.in
(Last visited on May 26, 2022).
 Statute and Kinds of Statute, available at: http://legalcode.co.in
(Last visited on May 23, 2022).
 Interpretation – Meaning, Objective And Basic Principles, available at:
https://lawcorner.in
(Last visited on May 24, 2022).
 Interpretation of statutes, available at: https://static.careers360.mobi
(Last visited on May 25, 2022).
 Bengal Immunity Co. Ltd. vs. State of Bihar, available at:: https://www.the-
laws.com
(Last visited on May 26, 2022).
 Bengal Immunity Co. Ltd. vs. State of Bihar, available at: https://blog.ipleaders.in
(Last visited on May 25, 2022).
 Bengal Immunity Co. Ltd. vs. State of Bihar, available at:
https://www.lawyerservices.in
(Last visited on May 26, 2022).

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