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Case study: Poppatlal Shah v/s State of Madras

Poppatlal Shah v State of Madras - 1953 AIR 274

Interpretation of statutes is a vast area which basically means that statue be interpreted in such a way that it provides justice to the parties. Legislators make different laws and are amended time to time for having greater efficient, but laws cannot be made for each and every situation as it would be just compiling up things unnecessarily. Statute is basically a document which helps and guides citizens what to do and what not.

Basically, Law is a fractal and as H.L.A Hart hypothetically explained it that for every situation law can't be made and has to interpret the existing things. He uses that:
legal rule prohibits from taking the vehicle to the park, here he generalises the word vehicle which as to be interpreted. Similarly there can't be a law stating the conditions when can be vehicle allowed in park and that has to be interpreted differently with different meanings.[1] There may be a case of emergency where ambulance might need to go in the park, then that can't be stated in a law. Therefore, interpretation is required as law is a very vast field.

I will be analysing the case of Poppatlal Shah v State of Madras 1953 which is a post-independence case of 1953.

This is an appeal against the order passed by the division bench of Madras High Court, against a criminal appeal, which convicted the appellant under section 15 of the Madras General sales tax act. The appellant was directed to pay fine of Rs. 1000/- and imprisonment of 3 months.

The appellant, Mr. Poppatlal Shah, was a partner in a firm under the name Indo Malayan Trading Company. The company was based in Madras and also had its head office there only. The business that firm conducting was with sale and purchase of oil, sago, and kirana (confectionary) items1.

The dispute arose for the non-payment of taxes in Madras under Madras Sales Tax Act, and so was the suit instituted against him. In the course of business, he used to pay sales tax in Calcutta. His business was with respect to the sale of goods and delivery was done in other states.

The = business was conducted in such a way that the company in their Madras head office used to get orders from merchants in Calcutta. Thereafter, the orders were dispatched to Calcutta by rail and steamers. All the monetary transaction was done in Calcutta at the time of delivery of orders to the consignees. He was later convicted, and sentencing was pronounced.

Legislation in Issue:
  • Madras Sales tax Act, to interpret the scope of taxation on sale that took outside the province.
  • Sales of Goods Act, to interpret the scope of phrase Sale and when is sale considered as complete?

the scope of word sale was interpreted for paying of sales tax.
Scope of explanation 2 of Madras Act XXV 1947 w.r.t what would account sale?

The rules and presumptions used in the interpretation are:
  1. Statute must be read as whole- Subsidiary Rule
    Briefly, it means that words or provisions shouldn't be read alone and must be read in statute as a whole.
  2. Rule of harmonious construction- Secondary Rule
    If two laws or provisions exists on the same subject matter, court should interpret in maximizing the possible attempt to harmonize the different laws.
  3. Retrospective Effect � Presumption
    Nothing should be interpreted in a retrospective manner, unless expressly mentioned in the statute.

Briefly discussing the outline of case and procedural history for understanding purpose, appellant argued that they were liable to pay taxes in Calcutta as delivery of goods took place there and mere orders were received in Calcutta only. On the other hand, state had made an argument that true test is to look where sale took place and not where the goods are to be delivered. Further, state argued that they used to maintain all the records in Madras, hence they are liable to pay taxes in Madras only. High Court agreed with the contentions of the state.. Hence the appeal before the Supreme Court.

Supreme Court took note of the contentions raised by the appellant that we need to have a proper interpretation and construction of the legislature and when interpreting the whole statute, it is clear that act doesn't authorize to levy tax upon the sale where goods are delivered outside the state/province.

Statute must be read as whole is basically a secondary rule which means that the constituent parts of the statute i.e. preamble, every word, phrase, or any sentence are to be read together so as to achieve the actual intent of the statute.

In interpreting the statute and considering the wide scope of statute and the word sale w.r.t the Madras Sales tax Act, the act itself defines the purpose that tax has to be levied on sale transactions. In my opinion, the Supreme Court has rightly interpreted the statute and also given wide ambit to the word sale and also referred to what actually is considered sale under Sale of Goods act.

Clearly, sale under Sale of Goods Act is the ownership of the property has to be transferred to the other party and then only sale would be concluded. During the interpretation of the phrase sale, few elements were laid down i.e. Order placing, bargaining/negotiating, processing the order, delivery, and possession. For sale to be considered complete, these elements needs to be fulfilled and actual ownership and possession needs to be changed.

Here, In my opinion, court has used the secondary rule of Rule of Harmonious Construction by harmonizing the word sale under Madras Sales Tax Act with the phrase Sale under Sales of Goods Act to interpret the actual meaning and intent of the Madras sales tax act. In the case of MSM Sharma v Sri Krishan Sinha[2], the court said that one section shouldn't defeat the other section and has to maximize the interpretation by construing the principles of both statutes in order to harmonize them and reach a maximum possible meaning.

The presumption of Retrospective operation[3] was also used in the interpretation while interpreting the explanation 2 of Madras Act XXV, which states that
Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this Province, wherever the contract of sale or purchase might have been made:
  1. if the goods were actually in this Province, at the time when the contract of sale or purchase�
  2. in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in this Province at any time after the contract of sale or purchase�..[4]
The said explanation was added in 1947 and the subject matter in issue is in dispute to the act of 1939 as appellant was made liable to pay taxes. Under the presumption of Retrospective operation, it means that no one should be charged for the act which is not an offense at the time of committal, basically, it is a principle of natural justice. This presumption is backed by the meaning that every statute has a prospective effect unless expressed in a statute and has to be applied from future date and not from past date, unless specified.

In the case of Garkiapati Veeraya v N. Subbiah Choudhary[5] , the court observed that in absence of anything in a statute that it will be retrospective, it can't be presumed and construed in a way that it has a retrospective operation. In case of J.P Jani, ITO Circle IV Ahmdebad, v Induprasad Devshankar[6], the court was of the opinion that principle behind this is that unless terms doesn't expressly provide in a statute, the statute can't be give retrospective operation and has to be construed prospectively.

In my opinion court had given their best attempt in order to provide justice. The secondary rule, Statute must be read as whole, backed the interpretation of the Madras Sales Tax act in order to know the actual intent of the statute and applying rule of harmonious construction, the meaning of phrase Sale has been interpreted correctly, and fulfilled the criteria that one section of statute must not defeat the purpose and meaning of other section in the statute.

Here, the phrase sale under the madras sales tax act was duly harmonized with sale under sale of goods act so as to maximize the possible meaning. In addition to this, in my opinion court could also have used the theory of textualism[7] in interpreting the word statute with rule of harmonious construction, as textualism means that focusing on a word rather than any purpose of statute, and here the word sale under sale of goods act was interpreted by the general meaning which clearly stated that transfer of ownership construes to be sale as complete.

Also, in my opinion the application of retrospective operation presumption was used to avoid double taxation upon citizens as if it was not applied, then the appellant would have suffered prejudice of paying double tax on the sale transactions.

The objective of interpretation of phrase, statute and act in the present case is to avoid double taxation upon citizens which is not free and fair and to prevail the justice.

  1. Hart, H. L. A. Positivism and the Separation of Law and Morals. Harvard Law Review, vol. 71, no. 4, 1958, pp. 593�629. JSTOR, Accessed 1 June 2020.
  2. MANU/SC/0020/1960
  3. Deep, A. (2014). Interpretation of Statutes. Retrieved June 01, 2020, from
  4. MANU/SC/0074/1953
  5. MANU/SC/0008/1957
  6. MANU/SC/0230/1968
  7. Brannon, V. C. (2018). Statutory Interpretation: Theories, Tools, and Trends. Congressional Research Service. Retrieved May 31, 2020, from

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