Perera d> Silva Ltd. v. Commissioner-General of Inland Revenue
1978 Present: Thamotheram, J., Rajaratnam, J. and
PERERA & SILVA LTD., Appellantand
COMMISSIONER-GENERAL OF INLAND. REVENUE,Respondent
S. C. 3/76—B.R.A./B.T.T. 5
Business Turnover Tax—Finance Act, No. 11 of 1963—Order undersection 121(1) published in ' Gazette No. 14.864/9 of 2.S. 1969—
" Articles manufactured in Ceylon and exported”—Articles manu-factured by one party exported by others—Liability to BusinessTurnover Tax—Ambiguity in taxing statutes—Doubt whether taxis attracted—When doubt is resolved in favour of taxpayer.
The appellant firm was’a manufacturer of wooden boxes andcomponent parts thereof. A portion of the boxes manufactu'edwere sold to others who used them to pack goods which thoseothers exported. The appellant claimed that (for quarters ending31.12.1939. 31.3.1970 and 30 6.1970) the value of th- sales of theboxes that were so used by others in the export of goods shouldhe exc'uded from the liab e tu nover of the appellant on theground that “articles manufactured in Ceylon and exported”were exempt from Business Turnover Tax in terms of an ordermade by the Minister under section 121 (2) of the Finance Act,.No. 11 of 1963, and published in Gazette No. 14,1.64/9 of 2.8.1969.The Assistant Commissione • of Inland Revenue made order dis-missing the claim and on appeal therefrom by the appellant to theBoard of Review, the Board affirmed the assessments and dismissedthe appeal holding that the exemption is avai'able only in respectof articles manufactured in Ceylon and exported in the course ofthe same business.
On a case stated for the opinion of the Supreme Court—
Held: (1) That “articles manufactured in Ceylon and exported”means articles manufactured in Ceylon and exported in a singlebusiness.
(2) That the turnover arising from articles sold by the appellantand expo ted by others is not exempt from Business Turnover Tax.
“The ordinary canons of construction apply in ascer-taining the meaning of a taxing statueIf in so construing
the statute the language is found to be so ambiguous that itis in doubt whether tax is attracted or not the doubt mustbe resolved in favour of the taxpayer, because it is not possible tofall back on any principle of common law to fill a gap in a taxing
statueIt is only when ambiguity remains after the statute
has been p-operly construed'that the Court is entitled to decide infavour of the taxpayer. ” C. N. Beatie: Elements of *he baw ofIncome and Capital Gains Taxation, at page 2 cited with'approvalper Thamotheram, J.
ASE stated for the opinion of the Supreme Court undersection 138A of the Finance Act, No. 11 of 1963.
W. Jayewardene, Q.C., with L. A. T. Williams, for theappellant.✓
P. S. de Silva, Deputy Solicitor-General, with S. Ratnapala,State Counsel, for the respondent.
Cur. adv. vuIt.
THAMOTHEBAM, J.—Perera <6 Silva Ltd. v. Commissioner-General oj 166
August 18, 1978. Thamotheram, J.
This is a case stated for the opinion of the Supreme Court undersection 138A (1) of the Finance Act, No. 11 of 1963, upon theapplication of Perera & Silva Ltd.
The questions of law stated for our opinion are,
Does “ articles manufactured in Ceylon and exported ”in the order published in Gazette No. 14,864/9 of 2.8.69,mean articles manufctured in Ceylon and exportedin a single business.
Is the turnover arising from wooden boxes and shooks,sold by the assessee during the quarters 31.12.69,
30.6.70 and exported by others exempt frombusiness turnover tax under the order made under121(1) published in the Gazette Extraordinary
,14,864/9 of 2.8.69.
Perera & Silva Ltd., are a firm of manufacturers of woodenboxes and shooks (a component part used in assembling woodenboxes). A part of the manufacture is on orders for persons whoexport goods such as tea, batteries, and spices from Sri Lanka.The assessor and appellant agreed on the value of the sales ofarticles that were used in the export of goods from Sri Lankaduring the three relevant quarters.
The dispute was whether the turnover relating to sales ofmanufactured boxes and shooks by Perera & Silva Ltd. usedsubsequently by the buyers for the export trade should be ex-cluded from the liable turnover of Perera & Silva Ltd. forthe purpose of the business turnover tax.
The Assistant Commissioner of Inland Revenue held that thetransactions .of Perera & Silva Ltd. are liable to business turn-over tax and confirmed the tax charged.
The Board of Review on Appeal held “ The wooden boxes andshooks though manufactured in Ceylon were not exported bythe assessee. The assessee became liable to pay tax on the pro-ceeds of sale, immediately the sale was concluded, whether theproceeds of sale, were actually received or only became receiva-ble. The proceeds of sale which are liable to tax at the time theturnover is made cannot by a process of interpretation be con-verted into proceeds of sale which would be exempted from tax.We are of opinion that the words “manufactured in Ceylon”and “ exported ” should be read conjunctively and accordinglythe exemption is available only in respect of articles manufac-tured in Ceylon and exported in the course of the same business,”
The assessments were affirmed and the appeal dismissed.
166 THAM OTHER AM, J.—Perera <0 Silva Ltd. v. Commissioner-General of
I nland Revenue
Section 119(1) states that “there shall be charged for everyyear of assessment commencing on or after October 1, 1963, fromevery person who carries on in any place in Ceylon the businessof a manufacturer or any other business a tax (hereinafter inthis part of this Act referred to as the business turnover tax)in respect of the turnover made by the person from that businesscomputed at such rate as the Minister may fix by order publishedin the Gazette. ”
The business in the instant case is that of a manufacturer.
“ Manufacturer means any person who—
makes any article ;
assembles or joins any article whether by chemicalprocess or otherwise ;
adopts for sale any article. ”
The person who carried on the particular business of manufac-turing wooden boxes was Perera & Silva Ltd. That was hisbusiness. The tax was in respect of the turnover made by Perera& Silva Ltd. from the business of – the manufacture carriedon by that firm, i.e., from the making of wooden boxes.
Now we look at the definition of ‘ turnover’. “Turnover in re-lation to any business means the total amount received or receiva-ble from transactions entered into in respect of that business ”.
Now when Perera & Silva Ltd. sold the boxes manufacturedby them, these were completed transactions entered into in res-pect of that business. The turnover tax was then payable in res-pect of the completed transactions unless these transactions camewithin one of the exceptions provided under section 121(1) ofthe Finance Act.
121 (1) “ The Minister may by order published in the Gazettedeclare any article specified in such order to be anexcepted article for the purpose of this part of the Act.Different articles may be declared to be exceptedarticles in respect of different classes or descriptionsof business;
(2)-When an article is under subsection (1) declared to bean excepted article in respect of any class or descrip-tion of business the sum realized from the sale of sucharticle shall not be taken into account for the purposeof ascertaining the turnover from such class or des-cription of business ”.
Acting under section 121 (2) the Minister had by Gazette noti-fication No. 14,864/9 of 2.8.69 included “ articles manufactured inCeylon and exported” in the Schedule to which section 121(1)of the Finance Act, No. 11 of 1963, applies.
THAMOTHERAM, J.—Perera da Silva Ltd. v. Commissioner-General oj
In our opinion the busuiness carried on by Perera and SilvaLtd. was only one of manufacture. It is only when the businessin question includes both manufacture and export that the ex-ception to liability can arise; the turnover tax is in respect ofthe turnover made by theft person (Perera & Silva Ltd.) fromthat business (manufacture of wooden boxes). The exception iswhen that business—includes both manufacture and export.
Our opinion therefore is as follows:
“ Articles manufactured in Ceylon and exported ” in the
order published in Gazette No. 14,864/9 of 2.8.69 meansarticles manufactured in Ceylon and exported in asingle business ;
The turnover arising from wooden boxes and shocks
sold by the assessee during the quarters 31.12.64,
and 30.6.70 and exported by others are not ex-empted from business turnover tax under the ordermade under 121 (1) published in the Gazette Extraordi-nary No. 14,864/9 of 2.8.69.
I may also add that in our view when an article, e.g., tea, isexported in wooden boxes, it is wrong to say that the boxes inwhich tea is exported are themselves exported—it is true theliteral meaning of ‘ export ’ is * sending out ’—but export con-notes a business transaction between some person in Sri Lankawith a person outside. If a Sri Lankan firm exports tea to a firmabroad, I think, it does violence to the English language to saythat the firm also exported wooden boxes in which the tea wassent. It is not any part of the particular export business.
The order made by the Minister on 2.8.69 had been amendedby an order published in Gazette No. 83/8 of 1.11.73. One of theexcepted articles mentioned in the latter order is “ articles manu-factured in Sri Lanka and exported by the manufacturer. ”
This amendment was no doubt due to the point taken in thepresent case being taken by many an assessee. We however do^not think that the statute was not express or that it wasambiguous.
The iaw on this point is set out succinctly in C. N. Beatie—Elements of the Law of Income and Capital Gains Taxation atpage 2;
“It has frequently been said that, there is no equity ina taxing statute. This means that tax being the creatureof statute, liability cannot be implied under any principleof equity but must be found in the express language of somestatutory provision. The ordinary canons of constructior
168 THAMOTHERAAl, J.—Percra tb Szlvo Ll'l. v. Oommiesioner-Oeneral of
apply in ascertaining the meaning of a taxing statute :
“ the only safe rule is to look at the words of the enact-ments and see what is the intention expressed by thesewords.” If in so construing the statute the language isfound to be so ambiguous that it is in doubt whether tax isattracted or not, the‘'doubt must be resolved in favour ofthe taxpayer, because it is not possible to fall back on anyprinciple of common law or equity to fill a gap in a taxingstatute. “The subject is not to be taxed unless the wordsof the taxing statute unambiguously impose the tax uponhim ”. However, this does not prevent the court from cons-truing a taxing statute against the subject, where that■appears to be' the correct interpretation of a provision themeaning of which it may be difficult to understand. Diffi-culty does not absolve the court from the1 duty of constru-ing a statute ; it is only when ambiguity remains after thestatute has been properly construed that the court is entitledto decide in favour of the taxpayer
We agree with the Assistant Commissioner that “ if theappellants interpretation is carried to its logical conclusion itwould mean that the liability of a transaction would have tobe determined by the ultimate use of the article traded in. Anarticle may change hands several times and may after severalyears be ultimately used for export. Can one then turn aroundat that stage and claim that “ the article was manufactured inCeylon and exported ” and therefore claim that a whole seriesof transactions are to be excluded from the liable turnover ofseveral traders over several quarters or even several years ?We affirm the opinion expressed and the reasoning of both theAssistant Commissioner of Inland Revenue and the Board ofReview on the questions stated for our view.
We therefore confirm the assessment made in this. case.
Rajaratnam, J.—I agree.
Coun-Tkome, J.—I agree.