Golden Rule of Interpretation and Pepsi Foods Ltd Case

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Golden Rule of Interpretation and Pepsi Foods Ltd
Case
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• In this article I will light up a recent
  watershed  judgement delivered by the Honble apex
  court in CIT VS PEPSI FOODS LTD income tax case.
  The issue before the apex court whether third
  proviso of section 254(2-A) is constitutional or
  not in the touch stone Article 14 of
  constitution? Now it is better to first let know
  what that section is. This section was introduced
  vide an amendment in the Finance Act 1999 whereby
  laid down the power of Honble ITAT power to grant
  stay on ongoing appeal proceeding and initially
  the tribunal power of granting stay on recovery
  proceeding was four years but by subsequent
  amendment in recent it has been reduced to one
  years or 365 days and it will be deemed
  automatically be vacated thereafter irrespective
  of fact that quantum appeal is not disposed by
  the tribunal. Now the said petitioner has
  challenged the said third proviso of said section
  before Honble Delhi High Court on the ground of
  expiry of said stay period before non disposal of
  quantum appeal by the ITAT not owning to the
  fault of appellant and Honble court struck down
  the third proviso as illegal and unconstitutional
  for violating the Article 14 of constitution.
  Article 14 deals with equality before law. Now
  being aggrieved with said order department
  challenged it before the apex court. In its order
  after discussing vividly about the scope of
  Article 14 and states power to make reasonable
  classification in light of its previous judgement
  in N. Venugopala Ravi Varma Rajah v. Union of
  India (1969) 1 SCC 681 (1969) 74 ITR 49. which
  noted as follows A taxing statute is not,
  therefore, exposed to attack on the ground of
  discrimination merely because different rates of
  taxation are prescribed for different categories
  of persons, transactions, occupations or
  objects., apex court in the present case has
  made major shift of its view by upholding the
  order of Delhi HC and dismissing the departmental
  appeal by applying the met wand of golden
  rule.

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• Now it is pertinent to discuss what the golden
  rule of interpretation? It is long settled
  judicial rule by Lord  Wensleydale,
  in Grey v. Pearson, noted that in many
  circumstances grammatical or literal
  interpretation of statute leads to absurdity,
  repugnance or inconsistency in regard to the
  object of the statute  (1857) 6 HL Cas 61, 106
  26 LJ Ch 473, 481. Thus, the Court in such cases
  where the rule of literal interpretation fails
  may modify the law only with view to remove the
  said absurdity. In this case by applying the said
  rule as well as Article 14, apex court reached to
  the unconstitutionality of third proviso on the
  premise that any law enacted by the legislature
  that treats the unequal as equal is illegal. In
  present case the expiry of stipulated one year of
  stay granted by the ITAT was not on default of
  the assessee but of the department. Therefore if
  the assessee is punished with withdrawal of stay
  on recovery proceeding as the literal
  interpretation of third proviso clearly states so
  will hit both the Article 14 by treating the
  unequal with equal means the department with
  assessee as well as leading to the absurdity by
  endorsing illegal which the golden rule does not
  permit. It was plea of petitioner department that
  by literal interpretation of said third proviso,
  the period of stay granted by tribunal can not be
  extended irrespective of reason for inordinate
  delay on disposal of quantum appeal. But Honble
  apex court very rightly held that although under
  Article 14 state can make classification in
  taxing statutes but within the periphery of
  reasonableness but Article 14 never permits to
  treat the equal with unequal. So any upholding of
  third proviso will be violative of constitution.
  Quidos  to apex court for strict application of
  golden rule in perfect manner which was
  unfortunately  violated by another Bench of apex
  court in a recent judgement in CHEMVEST CEMENT
  which is very disturbing in judicial discipline.
  Now this judgement will reset golden rule of
  interpretation in its own place of glory.
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