Final Projconcept of ‘mischief rule’ect Body

8/10/2019 Final Projconcept of mischief ruleect Body

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Introduction-

Aim and Objective-

The aim of this project is to understand the concept of mischief rule by

understanding the history and reason for its existence while referring to the

Heydens case. Objective of this project is to look into important aspects like

advantages and disadvantages, relevance in modern times (specifically, in

India) and a comparison with the other two rules, i.e The Golden Rule and

The Literal Rule.

Research Methodology-

Research will be doctrinal in nature. All the data and statistics to be

presented in the project will be taken from the pre-established research from

notable writers. The idea is to gather information from such writers and online

database, study and compare them and to present such theories and data in the

project.


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History of Mischief rule

Haydons Case:

The Mischief rule was established in the Haydens case. The facts of the

case wereThere was an academic institute called Ottery which used to give

tenancy of certain manor to a person called as Ware. Also, the heir of such

person was known as ware as well. The tenancy was established bycopyhold,

an ancient device for giving a parcel of a manor to a tenant, usually in return for

agricultural services, which was something like a long-running lease with

special privileges for each party. Ware and his son held their copyhold to have

for their lives, subject to the will of the lord and the custom particular to that

manor. The Wares copyhold was in a parcel also occupied by some tenants at

will. Later, the college then leased the same parcel to another man, named

Heydon, for a period of eighty years in return for rents equal to the traditional

rent for the components of the parcel.

Less than a year after the parcel had been leased to Heydon, Parliament

enacted theAct of Dissolution. The statute had the effect of dissolving many

religious colleges, including Ottery College, which lost its lands and rents toHenry VIII. However, a provision the Act kept in force, for aterm of life,any

grants made more than a year prior to the enactment of the statute. So, the

question was whether the tenancy right of Hayden is valid or void, also what

will be the validity of the lease?

The ruling was based on an important discussion of the relationship of a

statute to the pre-existingcommon law.The court concluded that the purpose of

the statute was to cure a mischief resulting from a defect in the common law.

Therefore, the court concluded, the remedy of the statute was limited to curing

that defect. Judges are supposed to construe statutes by seeking the true intent of

the makers of the Act, which is presumed to bepro bono publico,or intent for

the public good. He laid out four important points to be concerned when such

issue arises. Those points were

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?
http://en.wikipedia.org/wiki/Copyholdhttp://en.wikipedia.org/wiki/Dissolution_of_the_Lesser_Monasteries_Acthttp://en.wikipedia.org/wiki/Dissolution_of_the_Lesser_Monasteries_Acthttp://en.wikipedia.org/wiki/Dissolution_of_the_Lesser_Monasteries_Acthttp://en.wikipedia.org/w/index.php?title=Term_of_life&action=edit&redlink=1http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Pro_bonohttp://en.wikipedia.org/wiki/Pro_bonohttp://en.wikipedia.org/wiki/Pro_bonohttp://en.wikipedia.org/wiki/Pro_bonohttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/w/index.php?title=Term_of_life&action=edit&redlink=1http://en.wikipedia.org/wiki/Dissolution_of_the_Lesser_Monasteries_Acthttp://en.wikipedia.org/wiki/Copyhold


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3. What remedy the Parliament hath resolved and appointed to cure the

disease of the commonwealth?

4.

The true reason of the remedy.

By the application of the rules laid above, it can be inferred that the tenancyright of Hayden is valid, because the Act of Dissolution clearly states a

condition upon which the lease can exist and would not be terminated i.e. the

time period criteria. But, concerning the validity of the lease which was granted

to third person by Haydon, as the law did not provide for it, it was void.

Purposive approach:

Mischief rule tries to find out the actual purpose of the statute when

ambiguity arises. Such approach is called purposive approach. The purposive

approach, sometimes referred to as "purposivism", purposive construction,

purposive interpretation, or the "modern principle in construction"

is an

approach tostatutory andconstitutional interpretation under which common law

courts interpret an enactment (that is, a statute, a part of a statute, or a clause of

a constitution) in light of the purpose for which it was enacted. The historical

source of purposive interpretation is themischief rule established inHeydon's

Case.Purposive interpretation was introduced as a form of replacement for the

mischief rule, the plain meaning rule and thegolden rule to determine cases.

Purposive interpretation is exercised when the courts utilize extraneous

materials from the pre-enactment phase of legislation, including early drafts,

committee reports, white papers, etc. The purposive interpretation involves a

rejection of theexclusionary rule. Purposive interpretation is a legal

construction, which combines elements of both the subjective and objective.

The subjective elements include the intention of the author of the text, whereas

the objective elements include the intent of the reasonable author and the legal

systems fundamental values.1

1Barak, Aharon.Purposive Interpretation In Law. Princeton University Press (New Jersey), 2005, p. 88
http://en.wikipedia.org/wiki/Statutory_interpretationhttp://en.wikipedia.org/wiki/Constitutional_interpretationhttp://en.wikipedia.org/wiki/Mischief_rulehttp://en.wikipedia.org/wiki/Heydon%27s_Casehttp://en.wikipedia.org/wiki/Heydon%27s_Casehttp://en.wikipedia.org/wiki/Plain_meaning_rulehttp://en.wikipedia.org/wiki/Golden_rule_(law)http://en.wikipedia.org/wiki/Exclusionary_rulehttp://en.wikipedia.org/wiki/Exclusionary_rulehttp://en.wikipedia.org/wiki/Golden_rule_(law)http://en.wikipedia.org/wiki/Plain_meaning_rulehttp://en.wikipedia.org/wiki/Heydon%27s_Casehttp://en.wikipedia.org/wiki/Heydon%27s_Casehttp://en.wikipedia.org/wiki/Mischief_rulehttp://en.wikipedia.org/wiki/Constitutional_interpretationhttp://en.wikipedia.org/wiki/Statutory_interpretation


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The mischief rule saw further development in the following cases

a) Corkery v Carpenter(1951). In a decision of the Court of Kings Bench,

the Court had to decide whether a bicycle could be classified as acarriage. According to S.12 of theLicensing Act 1872, a person found

drunk in charge of a carriage on the highway can be arrested without a

warrant. A man was arrested drunk in charge of a bicycle. According to

the plain meaning rule a bike is not a carriage. Under the Mischief rule

the bicycle could constitute a carriage. The mischief the act was

attempting to remedy was that of people being on the road on transport

while drunk. Therefore a bicycle could be classified as a carriage.

b)

In Smith v Hughes (1960), the defendant was charged under the Street

Offences Act 1959 which made it an offence to solicit prostitution in a

public place. The defendant was soliciting from within private premises

(windows or on balconies) so they could be seen by the public without

entering into the streets. The court applied the mischief rule holding that

the activities of the defendant was within the mischief of the Act, and

soliciting from within a house, is soliciting and molesting of the public.

Therefore it is the same as if the defendant was outside on the street.

c) InRoyal College of Nursing of the UK v DHSS(1981), theRoyal College

of Nursingbrought an action challenging the legality of the involvement

of nurses in carrying outabortions.TheOffences Against the Person Act

1861 makes it an offence for any person to carry out an abortion.

TheAbortion Act 1967provided that it would be an absolute defence for

a medical practitioner to carry out abortions provided certain conditions

were satisfied. Advances in medical science meant surgical abortions

were largely replaced with hormonal abortions and it was common forthese to be administered by nurses. The courts were responsible for

determining whether the nurses performing abortions were acting

unlawfully as they were not medical practitioners. The courts found that

the Act was intended to provide for safe abortions and that nurses could

carry out such abortions.
http://en.wikipedia.org/wiki/Licensing_Act_1872http://en.wikipedia.org/wiki/Royal_College_of_Nursinghttp://en.wikipedia.org/wiki/Royal_College_of_Nursinghttp://en.wikipedia.org/wiki/Abortionhttp://en.wikipedia.org/wiki/Offences_Against_the_Person_Act_1861http://en.wikipedia.org/wiki/Offences_Against_the_Person_Act_1861http://en.wikipedia.org/wiki/Abortion_Act_1967http://en.wikipedia.org/wiki/Medical_practitionerhttp://en.wikipedia.org/wiki/Medical_practitionerhttp://en.wikipedia.org/wiki/Abortion_Act_1967http://en.wikipedia.org/wiki/Offences_Against_the_Person_Act_1861http://en.wikipedia.org/wiki/Offences_Against_the_Person_Act_1861http://en.wikipedia.org/wiki/Abortionhttp://en.wikipedia.org/wiki/Royal_College_of_Nursinghttp://en.wikipedia.org/wiki/Royal_College_of_Nursinghttp://en.wikipedia.org/wiki/Licensing_Act_1872


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Present Times-

Modern courts continue to apply the rule in a more restricted manner, and

generally with a greater regard for the integrity of the statutes which they are

interpreting. Driedger puts it this way: To this day, Heydons Case is

frequently cited. The courts still look for the mischief and remedy, but now

use what they find as aids to discover the meaning of what the legislature has

said rather than to change it.Driedger goes on to argue that this modern use of

the mischief rule ought to be understood as one of the components of what he

characterized as the "modern" method of statutory construction, rather than astand-alone rule serving (as it formerly had), as an alternative to the methods of

construction proposed by the plain meaning rule and the golden rule.2

Let us look at a few English cases from 20thand 21

stcentury-

1. Pepper (Inspector of Taxes) v Hart

3

Pepper v Hartis alandmark decision of theHouse of Lords on the useoflegislative history in statutory provisions. Thecourt established the principle

that whenprimary legislation is ambiguous then, in such circumstances, the

court may refer to statements made in the House of Commons orHouse of

Lords in an attempt to interpret the core meaning of the legislation.

Facts of this case are, Hart and nine others were teachers atMalvern College,

where from 1983 to 1986 they took advantage of a "concessionary fee" scheme,

which allowed their children to be educated at rates one fifth of those paid byother pupils. They disputed the amount of tax they had to pay under the

1976Finance Act,Section 63 of which said that:

The cash equivalent of any benefit chargeable to tax... is an amount equal to

the cost equivalent of the benefit, less so much (if any) of it as is made good by

the employee to those providing the benefit ... the cost of a benefit is the amount

of any expense incurred in or in connection with its provision, and (here and in

those subsections) includes a proper proportion of any expense. The Inland

2Elmer Driedger, The Construction of Statutes. Second Edition. Toronto: Butterworths, 1983, p. 75.

3[1992] UKHL 3
http://en.wikipedia.org/wiki/Landmark_casehttp://en.wikipedia.org/wiki/Judicial_functions_of_the_House_of_Lordshttp://en.wikipedia.org/wiki/Legislative_historyhttp://en.wikipedia.org/wiki/Courts_of_England_and_Waleshttp://en.wikipedia.org/wiki/Primary_legislationhttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/House_of_Lordshttp://en.wikipedia.org/wiki/House_of_Lordshttp://en.wikipedia.org/wiki/Malvern_Collegehttp://en.wikipedia.org/wiki/Finance_Acthttp://en.wikipedia.org/wiki/Inland_Revenuehttp://en.wikipedia.org/wiki/Case_citationhttp://en.wikipedia.org/wiki/Case_citationhttp://en.wikipedia.org/wiki/Inland_Revenuehttp://en.wikipedia.org/wiki/Finance_Acthttp://en.wikipedia.org/wiki/Malvern_Collegehttp://en.wikipedia.org/wiki/House_of_Lordshttp://en.wikipedia.org/wiki/House_of_Lordshttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/Primary_legislationhttp://en.wikipedia.org/wiki/Courts_of_England_and_Waleshttp://en.wikipedia.org/wiki/Legislative_historyhttp://en.wikipedia.org/wiki/Judicial_functions_of_the_House_of_Lordshttp://en.wikipedia.org/wiki/Landmark_case


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Revenue, attempting to tax this benefit, argued that the "cost" of the benefit

meant anaverage of the cost of providing it. Hart and his fellow teachers

disputed this and argued that it was insteadmarginal cost,saying that other than

food, stationery, laundry and similar there was no cost to the school due to the

children's presence that would not be there already. Initially, the judgment wentinto the favour of Hart and others, as it was held that the "concessionary fee"

covered all costs incurred by the school in the course of educating those

particular pupils. But when the case was taken to High Court, court decided to

look into the debate of the houses while the above mentioned Finance Act was

being enacted, during which, ministers had made statements in the House of

Commons which supported the idea that such "benefits" should be excluded

from tax. And Harts pleawas dismissed.

Lord Griffiths on the purposive approach:

"The days have passed when the courts adopted a literal approach. The courts

use a purposive approach, which seeks to give effect to the purpose oflegislation and are prepared to look at much extraneous material that bears uponthe background against which the legislation was enacted."

Lord Brown Wilkinson:

"My Lords, I have come to the conclusion that, as a matter of law, there are

sound reasons for making a limited modification to the existing rule (subject tostrict safeguards) unless there are constitutional or practical reasons which

outweigh them. In my judgment, subject to the questions of the privileges of the

House of Commons, reference to Parliamentary material should be permitted as

an aid to the construction of legislation which is ambiguous or obscure or theliteral meaning of which leads to an absurdity. Even in such cases references in

court to Parliamentary material should only be permitted where such material

clearly discloses the mischief aimed at or the legislative intention lying behind

the ambiguous or obscure words. I n the case of statements made in

Parl iament, as at present advised I cannot foresee that any statement otherthan the statement of the Minister or other promoter of the Bi ll is l ikely to

meet these cri ter ia."

This case law also faced criticism. During its review, it was questioned whether

the statement made by minister was included into the meaning of statute or not,

or whether such statement was accepted by the majority of house or not.

AcademicAileen Kavanagh questioned the logic used; the House of Lords was

essentially saying that, where a minister has made a statement about an act's

intent that was not questioned by Parliament, that statement can be used asevidence. However, there are many reasons why Members of Parliament might
http://en.wikipedia.org/wiki/Inland_Revenuehttp://en.wikipedia.org/wiki/Average_costhttp://en.wikipedia.org/wiki/Marginal_costhttp://en.wikipedia.org/w/index.php?title=Aileen_Kavanagh&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Aileen_Kavanagh&action=edit&redlink=1http://en.wikipedia.org/wiki/Marginal_costhttp://en.wikipedia.org/wiki/Average_costhttp://en.wikipedia.org/wiki/Inland_Revenue


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not question a statement, and this does not necessarily indicate that they

approve of it; in the case of theFinance Act, for example, it could simply be

that as the statement was not going to be added to the statute, they found noreason to actively oppose it.4

2. A v Hoare5

D, known as the Lotto rapist (convicted of several sexual assaults, including

rape) attempted to rape V in 1989. He was given a life sentence. At that time, he

was not worth suing for damages. In 2004, on day release from prison he bought

a lottery ticket and won 7 million. So in 2005, V sued for personal injury, but

the claim was rejected by the High Court because her claim had been brought

after the six-year limit imposed by the Limitation Act 1980.

The Limitation Act 1980 requires a claimant to bring an action against her

assailant for injury within 6 months. However, Parliament could not have

intended to exclude those who had been intentionally injured. Courts had a

discretion under s 33 of the Act to extend the time in the claimants' favour.

Time ran from when the claimant knew of the injury, which was both a

subjective and objective test not whether the claimant considered it serious

enough to justify proceedings but whether she would 'reasonably' have done so.

Once it had been ascertained what the claimant knew and what she should be

treated as having known, the actual claimant dropped out of the picture.

4Kavanagh (2005) p. 98

5[2008] HL
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Indian Context-

Within the context of law, the mischief rule is a rule of statutory

interpretation that attempts to determine the legislator's intention. Originatingfrom a 16th century case in the United Kingdom, its main aim is to determine

the "mischief and defect" that the statute in question has set out to remedy, and

what ruling would effectively implement this remedy. When material words are

capable of bearing two or more constructions the most firmly established rulefor construction of such words "of all statutes in general" is the rule laid down

in Heydons case, also known as mischief rule. This rule is also known as

purposive construction. The rules lay down that the court should adopt the

construction which shall suppress the mischief and advance the remedy. In

Indian context the rule was best explained in the case of Bengal immunityco. v State of Bihar.

Facts of the case -

The appellant company is an incorporated company carrying on the business of

manufacturing and selling various sera, vaccines, biological products and

medicines. Its registered head office is at Calcutta and its laboratory and factory

are at Baranagar in the district of 24 - Perganas in West Bengal. It is registered

as a dealer under the Bengal Finance (Sales Tax) Act and its registered number

is S.L. 683A. Its products have extensive sales throughout the Union of Indiaand abroad. The goods are dispatched from Calcutta by rail, steamer or air

against orders accepted by the appellant company in Calcutta. The appellant

company has neither any agent or manager in Bihar nor any office, godown orlaboratory in that State. On the 24th October, 1951 the Assistant Superintendent

of Commercial Taxes, Bihar wrote a letter to the appellant company which

concluded as follows :-

"Necessary action may therefore be taken to get your firm registered under the

Bihar Sales Tax Act. Steps may kindly be taken to deposit Bihar Sales Tax dues

in any Bihar Treasury at an early date under intimation to this Department".

On the 18th December, 1951 a notice was issued by the Superintendent,

Commercial Taxes, Central Circle Bihar, Patna, calling upon the appellant

company (i) to apply for registration and (ii) to submit returns showing its

turnover for the period commencing from the 26th January, 1950 and ending

with the 30th September, 1951. This notice was issued under section 13(5) ofthe Bihar Sales Tax Act, 1947 (hereinafter called the Act) read with rule 28. It

was drawn up according to Form No. 8 prescribed by the rules and was headed

"Notice of hearing under section 13(5)'. The reason for issuing this notice, asrecited therein, was that on information which had come to his possession the


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Superintendent was satisfied that the appellant company was liable to pay tax

but had nevertheless wilfully failed to apply for registration under the Act.

Suffice it to say that while the appellant company denied its liability on the

ground, inter alia, that it was not resident in Bihar, it carried on no business

there, none of its sales took place in Bihar and that it did not collect any salestax from any person of that State, the Bihar Sales Tax authorities maintainedthat under section 33, which was substantially based on article 286 of the

constitution and was inserted in the Act by the President's Adaptation Order

promulgated on the 4th April, 1951, 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 the purpose of consumption in that State were liable to BiharSales Tax.

Eventually on the 29th May, 1952 the Assistant Superintendent of Sales Tax,

Bihar called upon the appellant company to comply with the notice by the 14thJune, 1952 and threatened that, in default of compliance, he would proceed to

take steps for assessment to the best of his judgment. The appellant company by

its letter dated the 7th June, 1952 characterized the notice under section 13(5) as

ultra vires and entirely illegal and called upon the Superintendent to forthwith

rescind and cancel the same. On the 10th June, 1952 the appellant company

presented before the High Court at Patna a petition under article 226 claimingthe reliefs hereinbefore mentioned. The respondents did not file any affidavit in

opposition controverting any of the allegations of facts made in the petition and

it must, accordingly, be taken that those facts are admitted as correct by therespondents. The High Court dismissed the petition on the 4th December, 1952

but on the next day issued a certificate, under article 132(1) of the Constitution,that the case involved a substantial question of law as to the interpretation of the

constitution. Hence the present appeal.

The principal question is 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. This was done by construing article 286 whose interpretation came into

question and the meaning granted to it in the case of The State of Bombay v.The United Motors (India) Ltd. was overruled. It raises a question of

construction of article 286 of the Constitution.

It is a sound rule of construction of a statute firmly established in England as far

back as 1584 when Heydon's case was decided that -

"......... for the sure and true interpretation of all Statutes in general (be

they penal or beneficial, restrictive or enlarging of the common law) fourthings are to be discerned and considered :-


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discriminatory taxes on goods imported from other States, while upholding the

economic unity of India by providing for the freedom of inter-State trade and

commerce. In their attempt to harmonize and achieve these somewhat

conflicting objectives, they enacted articles 286. The above chaos was to cure

this mischief of multiple taxation and to preserve the free flow of inter-Statetrade or commerce in the Union of India regarded as one economic unit withoutany provincial barrier that the Constitution makers adopted article 286 in the

Constitution which runs as follows :-

286. (1) No law of a State shall impose, or authorise the imposition of, a tax

on the sale or purchase of goods where such sale or purchase takes place -

(a) Outside the State; or

(b) In the course of the import of the goods into, or export of the goods out

of, the territory of India.

Explanation. - For the purposes of sub-clause (a), a sale or purchase shall be

deemed to have taken place in the State in which the goods have actually been

delivered as a direct result of such sale or purchase for the purpose ofconsumption in that State, notwithstanding the fact that under the general law

relating to sale of goods the property in the goods has by reason of such sale or

purchase passed in another State.

(2) Except in so far as Parliament may by law otherwise provide, no law

of a State shall impose, or authorise the imposition of, a tax on the sale or

purchase of any goods where such sale or purchase takes place in the

course of inter-State trade or commerce :

Provided that the President may by order direct that any tax on the sale or

purchase of goods which was being lawfully levied by the Government of any

State immediately before the commencement of this Constitution shall,notwithstanding that the imposition of such tax is contrary to the provision of

this clause continue to be levied until the thirty-first day of March, 1951.

(3) No law made by the Legislature of a State imposing, or authorising

the imposition of, a tax on the sale or purchase of any such goods as have

been declared by Parliament by law to be essential for the life of the

community shall have effect unless it has been reserved for the

consideration of the President and has received his assent".

In clause (1)(a) of article 286 the mischief of multiple taxationas cured

based on nexus theory. In clause (1)(b) they considered sales or purchases from

the point of view of our foreign trade and placed a ban on the States' taxing

power in order to make our foreign trade free from any interference by theStates by way of a tax impost. In clause (2) they looked at sales or purchases in


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their inter-State character and imposed another ban in the interest of the

freedom of internal trade. Finally, in clause (3) the Constitution makers'

attention was riveted on the character and quality of the goods themselves are

they placed a fourth restriction on the States' power of imposing tax on sales or

purchases of goods declared to be essential for the life of the community. TheStates' legislative power with respect to a sale or purchase may be hit by one ormore of these bans. Thus, take the case of a sale of goods declared by

Parliament as essential by a seller in West Bengal to a purchaser in Bihar in

which goods are actually delivered as a direct result of such sale for

consumption in the State of Bihar. A law made by West Bengal without the

assent of the President taxing this sale will be unconstitutional because (1) itwill offend article 286(1)(a) as the sale has taken place outside the territory by

virtue of the Explanation to clause (1)(a), (2) it will also offend article 286(2) as

the sale has taken place in the course of inter-State trade or commerce and (3)

such law will also be contrary to article 286(3) as the goods are essential

commodities and the President's assent to the law was not obtained as required

by clause (3) of article 286 .

This was the interpretation given to Honble J Das. The Legislatures of the

States were empowered by article 246(3) read with Entry 54 of List II to make a

law with respect to taxes on sales or purchases of goods and hence the StateLegislatures considered themselves free to make a law imposing tax provided

they had some territorial nexus with such sales or purchases. This resulted in

prejudicing the interests of the ultimate consumers and also hampered the freeflow of inter-State trade or commerce. So the Constitution makers had to cure

that mischief. The first thing that they did was to take away the States' taxingpower with respect to sales or purchases which took place outside their

respective territories. This they did by clause (1)(a). If the matter had been left

there, the solution would have been imperfect, for then the question as to which

sale or purchase takes place outside a State would yet have remained open. So

the Constitution makers had to explain what an outside sale was and this theydid by the Explanation set forth in clause (1). It is quite obvious that it created a

legal fiction. Legal fictions are created only for some definite purpose. Here theavowed purpose of the Explanation is to explain what an outside sale referred to

in sub-clause (a) is. The judicial decisions referred to in the dissenting judgment

in The State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut

Factory9and the case of East End Dwellings Co. Ltd. v. Finsbury Borough

Council10

clearly indicate that a legal fiction is to be limited to the purpose forwhich it was created and should not be extended beyond that legitimate field. It

should further be remembered that the dominant, if not the sole, purpose of

article 286 is to place restrictions on the legislative powers of the States by

article 286 by imposing several bans.
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For clause 2 it was said that until Parliament by law made in exercise of the

powers vested in it by clause (2) provides otherwise, no State can impose or

authorise the imposition of any tax on sales or purchases of goods when such

sales or purchases take place in the course of inter-State trade or commerce.

It was decided that Bihar Sales Tax Act, 1947 in so far as it purports to tax sales

or purchases that take place in the course of inter-State trade or commerce, is

unconstitutional, illegal and void. The Act imposes tax on subjects divisible in

their nature but does not exclude in express terms subjects exempted by the

Constitution. In such a situation the Act need not be declared wholly ultra vires

and void. Until Parliament by law provides otherwise, the State of Bihar do

forbear and abstain from imposing sales tax on out-of-State dealers in 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. The State must pay the costs of theappellant in this Court and in the court below. Bhagwati, J. had agreed to the

above interpretation.

Dissenting Judgment:

Venkatarama Ayyar, J. , Sinha, J. along Jagannadhadas, J. had declined the

above interpretation. The Explanation to article 286(1)(a) of the Constitutionhas created a legal fiction as a result of which a transaction of sale or a purchase

partaking of an inter-State character has been treated as a domestic transaction.

The fiction has localized sales or purchases contemplated by the Explanation,by converting such transactions as would otherwise have been inter-State sales

or purchases into sales or purchases inside one State in a sense in which it isplaced in a class distinct and separate from what is referred to as sales or

purchases "outside the State" in the main body of article 286(1)(a) which

prohibits imposition of tax by any State.

The main purpose of creating the fiction is to prevent multiple taxationof the

same transaction, but, it may be added, not altogether to stop the taxationof

such transactions. The next question is how far the legal fiction should becarried in its actual application. The fiction created by the Explanation brings

such a sale within the taxing powers of the State within which such a sale is saidto have taken place. Such a result is brought about not by holding that the

Explanation has conferred positively the power on the relevant State to impose

sales tax, but by holding that such an inside sale is beyond the scope of the

prohibition contained in the main body of article 286(1)(a) which interdicts the

imposition of tax on a sale "outside the State". The Explanation has got to be

read as an integral part of article 286(1)(a) and thus read, it means negativelythat a sale or purchase outside a State cannot be taxed; and by necessary

implication, that a sale or purchase inside a State may be taxed by that State as


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falling outside the mischief of the prohibition directed against the imposition of

a tax on a sale or purchase of goods outside a State; in other words, as soon as a

sale or purchase of goods is declared to be outside the pale of the prohibition

contained in article 286(1)(a), the State's power of imposing a tax contained in

article 246 read with item 54 of List II of 7th Schedule comes into operation.

The view of the former 3 judges goes beyond the purpose of the creation of

the fiction which admittedly was to prevent multiple taxation. The view as

propounded by them besides preventing multiple taxationgoes to the length of

prohibiting any imposition of sales tax by any State. Such was not the intention

of the Constitution. Whereas the imposition of multiple sales tax on transactions

of sale or purchase may be an obstacle to the free flow of inland trade and

commerce, the imposition of sales tax by a single State in which the sale is

deemed to have taken place by virtue of the Explanation cannot be predicated as

having such an effect. Clause (2) of article 286 of the Constitution is subject toarticle 286(1)(a) read with the Explanation.

Finally, the former view was adopted and it was declared that until Parliament

by law provides otherwise, the State of Bihar do for bear and abstain fromimposing Sales Tax on out-of-State dealers in 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.

.

Conclusion-

After analysing the complete information from various primary and secondary

sources, a final conclusion would be provided in the final draft of the research work.


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Bibliography-

1. Principles of Statutory Interpretation by Justice G P Singh

2.

Interpretation of Statutes by NS Bindra

3. Interpretation of statutes by PM Bakshi

4. Introduction to interpretation by Dr. Avtar Singh

Final Projconcept of ‘mischief rule’ect Body

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