Thungabhadra Industries Ltd vs The Government of Andhra Pradesh

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeals Nos. 781-783 of 1962

Decision Date: 22 October 1963

Coram: N. Rajagopala Ayyangar, A.K. Sarkar, K.C. Das Gupta

In this matter, the Supreme Court of India issued its judgment on 22 October 1963 concerning the dispute between Thungabhadra Industries Ltd and the Government of Andhra Pradesh. The judgment was authored by Justice N. Rajagopala Ayyangar and the bench included Justices N. Rajagopala Ayyangar, A. K. Sarkar and K. C. Das Gupta. The petitioner before the Court was Thungabhadra Industries Ltd while the respondent was the Government of Andhra Pradesh. The decision is reported in the 1964 All India Reporter at page 1372 and in the 1964 Supreme Court Reports (Supplement) at volume 5, page 174, and it has subsequently been cited as R 1983 SC1125, D 1989 SC1654 and other authorities. The applicable statutory provision was Section 47, Rule 1 of the Civil Procedure Code, 1908, together with the provisions concerning a petition for a certificate of fitness under Article 133(1)(c) of the Constitution. The Court also considered procedural questions relating to whether the cost involved any substantial question of law, the nature of an “error apparent on the face of the record”, the requirement of giving notice to the respondent before granting special leave, and whether an objection to the maintainability of an appeal could be raised after special leave had been granted, as governed by Supreme Court Rules 1950, Order XIX, Rule 4.

The factual backdrop concerned the assessment year 1949‑50, when the appellant filed a tax return showing his turnover from the sale of oil and, in that return, included the value of hydrogenated oil that he had sold. The appellant claimed a deduction under Rule 18 of the Turnover and Assessment Rules for the value of groundnuts that had been used to produce the hydrogenated oil, groundnuts on which tax had been paid at the time of purchase. The sales tax authorities rejected the deduction on the ground that hydrogenated groundnut oil did not qualify as groundnut oil within the meaning of the rule. This rejection was upheld by the High Court on 11 February 1955 in Tax Revision Case No. 120 of 1953 filed by the appellant. Nevertheless, the High Court granted a certificate of fitness under Article 133(1) of the Constitution, acknowledging that substantial questions of law arose. The same issue was revisited for the assessment years 1950‑51, 1951‑52 and 1952‑53, and each time the sales tax authorities and the High Court ruled against the appellant. The appellant again applied for a certificate of fitness under Article 133(1), but the High Court dismissed the petition on 4 September 1959, stating that the judgment sought to be appealed was one of affirmation and did not involve any substantial question of law, and therefore was not a fit case for appeal to the Supreme Court. On 23 November 1959, the appellant filed applications for review under Section 47, Rule 1 of the Code of Civil Procedure, but these were dismissed. Subsequently, the appellant sought special leave to appeal under Article 136 of the Constitution against the orders dismissing the review applications, and the Supreme Court granted leave after giving notice to the respondent. When the appeal was scheduled for hearing, the respondent raised a preliminary objection that the special leave should be revoked.

The respondent did not raise any objection to the grant of special leave at the hearing of the applications under Article 136, nor were such objections included in the statement of case filed under Order XVIII of the Supreme Court Rules 1950. The Court held that where notice of an application for special leave has been given to the respondent before the hearing, the respondent is barred from later challenging the maintainability of the appeal or the propriety of the grant of special leave. An objection may be entertained only if the ground for objection arises after the leave has been granted, or if the ground could not have been discovered by the respondent at the time of the hearing despite the exercise of reasonable care. The Court further held that the observation in the order dated 4 September 1959, which stated that the case did not present any substantial question of law, amounted to an “error apparent on the face of the record” within the meaning of Order 47, rule 1 of the Code of Civil Procedure. The Court reasoned that the existence of a substantial legal question was evident without the need for elaborate argument. The matter before the Court comprised civil appeals numbered 781 to 783 of 1962. These were special‑leave appeals against the judgment and order dated 6 January 1961 of the Andhra Pradesh High Court in Civil Miscellaneous Petitions 4672 to 4674 of 1960. Counsel for the appellant, consisting of three members, represented the appellant in all the appeals. Counsel for the respondent, consisting of two members, represented the respondent in all the appeals. The judgment was delivered on 22 October 1963 by Justice Ayyangar.

The appeals raised unusual issues that required the Court to examine whether the common order of the Andhra Pradesh High Court, which rejected applications for review of an earlier order, was correct in view of the facts. The appellant, Thungabhadra Industries Ltd., is a manufacturer of groundnut oil. It processes groundnuts into oil, part of which is further hydrogenated for sale as hydrogenated oil, while the remaining portion is sold as ordinary groundnut oil. The Madras General Sales Tax Act, applicable in the State of Andhra Pradesh, imposes tax on groundnuts at the point of purchase and imposes tax on groundnut oil at the point of sale. Consequently, a person who purchases groundnuts, converts them into oil, and subsequently sells the oil is liable to pay tax twice – once when the groundnuts are bought and again when the oil is sold. To alleviate the hardship caused by this double levy, the legislature framed specific provisions. Rule 5(k) of the Turnover and Assessment Rules provides that, in the case of a registered manufacturer of groundnut oil and cake, the amount which

The Court noted that Rule 5(k) permitted a registered manufacturer to deduct from his gross turnover the amount specified in Rule 18, provided that the conditions laid down in that rule were satisfied. The Court then reproduced the full text of Rule 18 for clarity. Rule 18 stated, first, that any dealer who manufactured groundnut oil and cake from groundnut or kernel that he had purchased could, on application to the assessing authority having jurisdiction over the area where he conducted his business, be registered as a manufacturer of groundnut oil and cake. Second, the rule provided that every such registered manufacturer of groundnut oil would be entitled to a deduction under clause (k) of sub‑rule (1) of Rule 5. The deduction was to be equal to the value of the groundnut or kernel purchased by the manufacturer and converted into oil and cake, on condition that the tax on such purchases had been paid to the State. The rule further required that the amount for which the oil was sold be included in the manufacturer’s net turnover, and that the portion of turnover on which the deduction was allowed could not exceed the turnover attributable to the groundnut or kernel used in the manufacture of the oil and included in the net turnover.

The Court observed that the appellant, M/s Thungabhadra Industries Ltd., openly admitted that it was a manufacturer registered under the provisions of Rule 18. For the financial year 1949‑50, the appellant filed its sales‑tax return disclosing the turnover obtained from the sale of oil. In that return the appellant included the value of the hydrogenated oil that it had sold and claimed a deduction under Rule 18 for the value of the groundnuts that had been used to produce the hydrogenated oil, on which the appellant had paid tax at the point of purchase.

The Sales Tax authorities rejected the appellant’s claim, holding that “hydrogenated groundnut oil” did not fall within the definition of “groundnut oil” contemplated by Rule 18(2). After the departmental rejection, the appellant approached the High Court of Andhra Pradesh by filing Tax Revision Case 120 of 1953. The High Court, by its judgment dated 11 February 1955, affirmed the decision of the department and denied the deduction.

Subsequently, the appellant filed an application before the same High Court seeking a certificate of fitness under Article 133(1) of the Constitution. The application contended that substantial questions of law arose concerning the interpretation of the Madras General Sales Tax Act and its Rules, as well as other statutes relied upon by the appellant to support its claim. The learned judges, by order dated 21 February 1956, granted the certificate of fitness, thereby recognizing that the matter raised a question of general importance.

The Court then set out the text of the High Court’s order for the record. The order stated that the petition raised a question of general importance, namely whether hydrogenated groundnut oil, popularly known as Vanaspathi, should be considered “groundnut oil” for the purpose of allowing the assessee to claim exemption under Rules 18(2) and 5(1)(g) of the Turnover and Assessment Rules, which were framed by the Government under the authority of Section 3 and the relevant sub‑rules of the Madras General Sales Tax Act.

The matter concerned sections four and five of the Madras General Sales Tax Act, 1939. The core issue in the dispute turned on whether the essential characteristics of groundnut oil remained unchanged despite the chemical processes of hydrogenation that the oil underwent. The question also required interpretation of notifications issued by the Government of India under the Essential Supplies (Temporary Powers) Act and certain provisions of the Vegetable Oils Products Control Order. In view of these considerations the Court thought that the case was suitable for appeal to the Supreme Court, and therefore it granted leave to appeal. The appeal that was consequently entertained in the Supreme Court was assigned the number Civil Appeal 498 of 1958. That appeal was finally disposed of on 18 October 1960 and it is reported as M/s Thungabhadra Industries Ltd. v. The Commercial lax Officer, Kumool(1).

In the meantime, assessments for the three succeeding fiscal years—1950‑51, 1951‑52 and 1952‑53—raised the identical question of whether “hydrogenated groundnut oil” could be treated as “groundnut oil” for the purpose of claiming the deduction of purchase turnover under rule 18(2) of the Turnover and Assessment Rules. The State Tax Officer decided the question against the appellant. The appellant disputed that order before the Deputy Commissioner of Commercial Taxes. Because the same question was pending before the High Court for the 1949‑50 assessment year, the appellate authority postponed its decision until the High Court rendered its judgment. When the High Court, in T.R.C. 120 of 1953, decided against the appellant on 11 February 1955, it disposed of the appeal by an order dated 5 April 1955.

Subsequently the appellant approached the Sales Tax Appellate Tribunal. That step was essentially a formality, as the Tribunal was bound by the High Court’s earlier judgment; consequently the Tribunal dismissed the appellant’s appeals by an order dated 20 October 1955 (see (1) [1961] 2 S.C.R. 14). Undeterred, the appellant filed three Tax Revision Cases—T.R.C. 75, 76 and 77 of 1956—relating respectively to the three assessment years in question. The learned Judges of the High Court dismissed all three revision cases on 7 October 1958, following the precedent set by their earlier decision in T.R.C. 120 of 1953 concerning the 1949‑50 assessment.

At that stage the correctness of the High Court’s decision in T.R.C. 120 of 1953 was still awaiting determination by this Court, a situation that arose because the High Court had previously granted a certificate of fitness under Article 133(1) of the Constitution. Seeking to obtain a similar certificate of fitness for the three Tax Revision Cases, the appellant filed three miscellaneous petitions on 16 February 1959 under Article 133(1) of the Constitution, contending that the matters involved substantial questions of law regarding the interpretation of the Sales Tax Act and the Rules made thereunder. The learned Judges, however, dismissed those petitions by an order dated 4 September 1959, stating: “The judgment sought to be appealed against is one of

In this matter the Court examined the order dated 4 September 1959, in which the learned Judges had declined the appellant’s petitions for a certificate of fitness. The order stated that the judgment sought to be appealed was merely an affirmance, that it did not raise any substantial question of law concerning the interpretation of the Constitution, and that it was therefore not a fit case for appeal to the Supreme Court. The principal issue before the Court was whether that order was defective because of an error apparent on the face of the record.

The appellant responded to the order by filing three applications for review under Order XLVII, rule 1 of the Civil Procedure Code. In those applications, filed on 23 November 1959, the appellant alleged that the order should be reviewed on the ground that, in similar circumstances, leave to appeal to the Supreme Court had been granted for a previous year, and no reason was shown for refusing it in the present cases. Notice of the applications was issued to the respondent‑State Government, and the applications were listed for hearing on 6 January 1961. On that date the learned Judges dismissed the review applications and gave the following reasons: the sole ground presented was the alleged inconsistency with a prior grant of leave, which the Judges considered insufficient to merit a review; furthermore, a special leave petition had been presented to the Supreme Court under Article 136 of the Constitution and had been dismissed, apparently because it was not filed within time, and therefore the order of 4 September 1959 dismissing petitions No. 4823, 4825 and 4827 of 1959 could not be reviewed.

Subsequently the appellant filed applications for special leave to the Supreme Court seeking to challenge the correctness of the order of 4 September 1959. Special leave was granted after notice was issued to the respondent, and the appeals now stood before the Court. Before addressing the arguments raised on behalf of the appellant, the Court considered an objection lodged by counsel for the respondent, who argued that the special leave should be revoked. The Court refused to permit that objection for two principal reasons. First, the special leave had been granted after notice to the respondent, providing the respondent with an opportunity to raise any objection to the maintainability of the appeal or to the grant of special leave; any such ground should have been raised at that stage, except in extraordinary circumstances where the ground arose only after the grant or could not have been ascertained then. Second, the object of issuing notice prior to the grant of leave was to allow the respondent to bring any grounds for refusing leave, and to permit a later objection would defeat that purpose, especially after the appellant had incurred costs. Moreover, the respondent’s statement of case did not disclose any ground for revoking the leave, nor did it contain a prayer for such relief, indicating that the respondent had not been taken by surprise, as required by Order XIX, rule 4 of the Supreme Court Rules.

The Court explained that the purpose of requiring the respondent to be heard before special leave is granted is to give the respondent an opportunity to point out any reasons why leave should be refused. If the respondent were allowed to raise such objections only later—at the hearing of the appeal and after the appellant had already borne all costs—then the rule would be defeated. The Court observed that the respondent could not, at that later stage, seek to have the leave that was granted after notice to him revoked on a ground that was already available at the time the special‑leave application was considered. Furthermore, the statement of the case filed by the respondent contained no ground on which the previously granted leave should be set aside, nor did it include any prayer asking for such relief. The Court noted that one of the main purposes of a statement of the case is to prevent any party from being surprised at the hearing, a purpose reinforced by Order XIX, Rule 4 of the Supreme Court Rules, which provides that no party may rely at the hearing on any ground not mentioned in the statement of the case filed by that party, unless the Court gives permission. The Court also observed that there was no claim that the ground the respondent wished to raise had arisen after the statement of case was filed. In view of these circumstances, the Court declined to allow the respondent to develop an argument urging that the special leave previously granted should be revoked. The Court added that even if the respondent’s counsel had raised the matter at the hearing of the special‑leave petition, it would not have materially helped the respondent in resisting the grant of leave. The specific point the respondent sought to raise was that, in the special‑leave petition, the appellant had asserted that the decision of this Court overturning the High Court judgment in T.R.C. 120 of 1953 had been brought to the High Court’s notice. The respondent argued that this assertion was false for two reasons: first, the present order under appeal does not refer to that decision; and second, the decision had not been reported in any official or unofficial law reports until long after January 1961, when the petition for review was heard. The Court found that neither of these circumstances alone could establish that the appellant’s statement in the special‑leave petition was untrue. The Court further observed that the learned judges might have thought that the decision in question bore no material relevance to the sole issue before them, namely whether their September 1959 order was affected by an error of the type that would bring it within Order XLVII, Rule 1 of the Civil Procedure Code. Viewed in that light, the decision would have no relevance to the matter being considered. Regarding the appellant’s other argument, the Court noted that...

The Court observed that the appellant did not have to wait for the case to appear in any law reports because the appellant could have produced a copy of the Supreme Court’s judgment. Being a party to the proceeding, it was highly unlikely that the appellant did not possess such a copy. Consequently, the appellant’s claim that it had drawn the Court’s attention to the decision could not be shown to be false merely because the decision was not reported until long after January 1961. On this basis, the Court rejected the oral application that sought to revoke the leave that had been granted, describing the application as completely without merit. The Court then indicated that it would next address the merits of the appeals. However, before doing so, it deemed it necessary to refer to a circumstance that the learned Judges of the High Court had cited as a proper ground for refusing the petition for review. This circumstance arose from the second ground articulated by the High Court Judges in their order dated 6 January 1961, which refused to grant the review. In their own words, the High Court Judges stated: “That apart, the Supreme Court was moved under Article 136 of the Constitution for special leave and that was dismissed, perhaps on the ground that it was not filed in time.” The Court proceeded to set out the facts relevant to this issue.

As previously noted, the applications seeking review of the order dated 4 September 1959, which had refused the certificates, were filed on 23 November 1959. While those review applications were pending, the appellant filed, on 30 November 1959, petitions for special leave to the Supreme Court under Article 136 of the Constitution. These petitions were filed beyond the period of limitation prescribed by the Rules. Consequently, an application for condonation of delay was filed together with the special‑leave petitions. Both the petitions and the condonation applications were presented for hearing at the same time, and the Supreme Court refused to condone the delay. As a result, the special‑leave petitions never legally entered the Court’s file. Order XLVII rule 1(1) of the Civil Procedure Code permits a review application to be filed “from a decree or order from which an appeal is allowed but from which no appeal has been preferred.” On the date the review application was filed, the appellant had not yet filed an appeal to the Supreme Court; therefore, the conditions of Order XLVII rule 1(1) did not prevent the review petition from being entertained. The respondent’s counsel did not contest this position, and the High Court’s judgment could not be read as rejecting the review petition on that ground. The Court held that the decisive factor for determining whether the conditions of Order XLVII rule 1(1) were satisfied was the date of filing of the review application. If, on that date, no appeal had been filed, the Court hearing the review petition was competent to decide the application on its merits.

Notwithstanding that an appeal was still pending, the Court stipulated that its jurisdiction to hear the review petition would cease if, before a final decision on the review, the appeal itself were disposed of. The Court then examined the effect of its own refusal to condone the delay in filing a petition for special leave. It was observed that no party argued that the Court’s refusal to entertain the special‑leave petition on the stated grounds barred the reviewing Court’s jurisdiction or its powers. The respondent’s counsel also did not contest this position. Consequently, the Court could not agree with the High Court judges who had held that the refusal to condone the delay could either deprive the High Court of jurisdiction to decide the review or constitute a relevant factor in its decision‑making. The Court further held that, even if the original order dated 4 September 1959 were affected by an error apparent on the face of the record, the failure of the special‑leave petition to be entertained in this Court could not, by itself or together with other considerations, serve as a ground to reject the review application.

The Court found it appropriate to first consider the part of the High Court order now under appeal, after determining whether the September 1959 order rejecting the appellant’s petition for a certificate of fitness was indeed vitiated by an apparent error. Upon analysis, the Court noted that the High Court gave only a single reason for refusing the certificate. Although the order began with a statement that the judgment was one of affirmance, this introductory remark was merely a prelude to the substantive reasoning, which held that the certificate was refused because the case did not involve any substantial question of law concerning the interpretation of the Constitution. The initial reference to an “affirmance” suggested that the judges were thinking of Article 133 of the Constitution, which alone, unlike Article 132, mentions a judgment of affirmance; nevertheless, they mistakenly reproduced the wording of Article 132(1). Since no party claimed that any constitutional interpretation issue was involved, the Court concluded that the phrase “substantial question of law relating to the interpretation of the Constitution” was a typographical error, and the judges actually intended to refer to the absence of a substantial question of law arising in the appeal. The appellant’s counsel had emphasized this point in the September 1959 order, arguing that it disclosed an error apparent on the face of the record.

The Court noted that the reference in the September 1959 order seemed to show that the Judges had not fully considered the question raised in the application for a certificate of fitness; consequently, the Court treated the reference as a clerical mistake and held that the Judges actually intended to apply the provisions of Article 133(1), which the appellants had relied upon in their certificate application. The Court explained that the wording in the September 1959 order, which spoke of a substantial question of law concerning constitutional interpretation, was in fact meant to convey that no substantial question of law was involved in the appeal that the parties sought to bring before this Court. The factual record showed that the matters of T.R.C. 75, 76 and 77 of 1956 presented no real question of fact; the sole issue concerned the claim to deduct the value of groundnut on which purchase tax had been paid, groundnut that had been converted into hydrogenated oil, sold, and then included in the appellant’s turnover.

The Court further observed that the High Court decided those three T.R.C. reports not by examining any particular facts, but by following the precedent set in T.R.C. 120 of 1953, where the High Court had accepted the construction placed by departmental authorities on rule 18(2) of the Turnover and Assessment Rules. The substantial points of law alleged to arise in the present appeal were set out in the petition for the certificate and, in effect, reproduced the content of the earlier petition that sought a certificate against the decision in T.R.C. 120 of 1953. The learned Judges, including the Chief Justice who had participated in the earlier decision and the grant of the earlier certificate of fitness, had considered those points and expressed the view that substantial questions of law of general importance were involved; those views had been recorded in a judgment reproduced earlier by the Court. The present inquiry, however, centred on whether the statement in the September 1959 order—that the case did not involve any substantial question of law—constituted an “error apparent on the face of the record”. The Court held that the earlier finding, on an identical set of facts, that a substantial question of law arose could not be taken as conclusive, because the earlier order itself might have been erroneous. Moreover, even if the September 1959 statement was wrong, it did not automatically amount to an “error apparent on the face of the record”, since a real distinction exists between a merely erroneous decision and a decision vitiated by an error apparent on the face of the record. The Court clarified that a review is not a disguised appeal intended to rehear and correct an erroneous decision, but is limited to the correction of patent error.

The Court explained that a decision may be reheard and corrected only when a patent error is present, and it did not intend to give an exhaustive discussion of the distinction between a patent error and an error apparent on the face of the record. It observed that if, without any elaborate argument, one can point to an error that presents a substantial point of law so plainly that no two opinions could reasonably be entertained, then a clear case of error apparent on the face of the record is established. The Court noted that no questions of fact were involved in the High Court’s decision in T.R.C. 75 to 77 of 1956; the entire controversy concerned the correct interpretation of rule 18(1) of the Turnover and Assessment Rules together with other statutes referred to by the High Court in its February 1956 order. The Court further observed that it could not be doubted or disputed that these matters constituted substantial questions of law. Consequently, the appellant’s submission that the September 1959 order was vitiated by “error apparent” as contemplated in Order XLVII rule 1 of the Civil Procedure Code, because it stated that no substantial question of law arose, was found to be well‑founded. The Court recorded that counsel for the respondent did not argue that the September 1959 order was free from such error. Rather, the respondent’s counsel submitted that the Court should focus not on whether the earlier order was vitiated but on the grounds raised by the appellant during the hearing of the review application, and that had the point now expressed not been raised at that stage, the Court would not have interfered with the order dismissing the review. The respondent’s counsel highlighted that, at the stage of arguments on the review application, the only ground raised before the Court, as shown by the judgment, was that the September 1959 order was erroneous because a certificate had been granted on a previous occasion. The Court extracted the text of the January 1961 order in which this argument was noted and confirmed that it was the sole point urged. The discussion then turned to the meaning of the phrase “in similar circumstances in regard to a previous year.” The respondent’s counsel suggested that the phrase meant the appellant relied on the February 21, 1956 order granting a certificate of fitness in the High Court decision in T.R.C. 120 of 1953 merely as a precedent and nothing more. On that basis, the respondent’s counsel contended vigorously that the mere fact that a certificate had been granted for an earlier year could not, by itself, render a later refusal of a certificate erroneous.

In this case, the Court noted that the argument that a later‑year order was erroneous solely because a certificate had been granted in an earlier year did not amount to a patent error. The Court affirmed that it had already considered this aspect of the dispute, but it disagreed with the characterization of the argument that had been rejected by the learned Judges. The order dated 21 February 1956, which concerned the preceding year, had been placed before the Court and was relied upon not as a binding precedent that must be followed, but as a document that set out the specific substantial questions of law that arose for decision in the present appeals. The Court explained that the attention of the judges was drawn to the terms of that earlier order in order to highlight the failure to recognise the existence of those questions and to demonstrate that the statement in the September 1959 order—that no substantial question of law was involved in the appeals—was plainly erroneous. The Court pointed out that this point was made unmistakably clear by the contents of the petition for review, where the aspect now being discussed had been expressly set out.

The Court further observed that because the earlier order originated from the same Court and from a bench that included some of the same judges, it was referred to as a convenient summary of the various points of law that had arisen. The purpose of that reference was to bring to the notice of the Court the error it had committed in stating that no substantial question of law arose in the appeals. The Court held that if, by the first sentence of the September 1959 order, the learned Judges had meant that the contention before them was to claim the 1956 order as a binding precedent, then they had failed to appreciate the true substance of the appellant’s argument. Conversely, if the Judges had intended to say that the matters set out in their order granting a certificate in relation to the decision in T.R.C. 120 of 1953 were not also involved in their judgment in T.R.C.s 75, 76 and 77, the Court found that view to be erroneous, because the questions of law involved were identical. Moreover, if the Judges had meant to declare that those matters were not substantial questions of law within Article 133(1), the Court concluded that they were again in error.

Consequently, the reasoning of the learned Judges in the order now under appeal could not serve as a basis for rejecting the applications for review of the September 1959 orders. The Court therefore determined that the learned Judges had erred in rejecting the application for review and held that the petitions for review should have been allowed. The Court expressly added that in reaching this conclusion it had not taken into account, nor been influenced by, the view expressed by this Court in Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Kurnool (1) concerning the construction of Rule 18(2) of the Turnover & Assessment Rules, because that decision was wholly irrelevant to the correctness of the order rejecting the review applications, which was the sole question for decision in these appeals. Before concluding, the Court indicated that it would make an additional observation.

The Court noted an observation raised by counsel for the respondent, namely that even if the appeal were to be allowed the Court should not make any order directing costs against the respondent’s client. It then turned to the substantive issue concerning the appellant’s claim to an exemption which the High Court had disallowed in the revisions numbered T.R.C. 75, 76 and 77. The Court explained that the appellant’s entitlement to the exemption depended on the proper construction of rule 18(2) of the Turnover and Assessment Rules, and specifically on the meaning of the expression “groundnut oil” appearing in that rule, that is, whether the term embraced “hydrogenated oil”. The Court recalled its earlier judgment in M/s Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Kurnool (1), where it had construed the word “groundnut oil” as it stood in rule 18 of the Turnover and Assessment Rules.

The Court observed that the assessment proceedings for the years 1950‑51, 1951‑52 and 1952‑53 had not reached finality against the assessee because applications for review of those assessments were still pending before the High Court. In view of that circumstance, the Court held that it would have been reasonable to expect the Sales Tax authorities to extend to the appellant the benefit of the Court’s decision in the later years as well, unless an insuperable difficulty or another circumstance prevented them from doing so. The Court found that the respondent’s counsel had not identified any such difficulty or circumstance. Accordingly, with respect to the merits of the controversy in the tax‑revision cases where certificates were sought, the Court affirmed that the appellant should receive the benefit of the earlier construction. The Court added that, if on any purely technical point the State were indisputably entitled to succeed, it would be free to collect the tax as assessed and as affirmed by the High Court in its favour. However, because the respondent had failed to establish the objections raised to keep the matter out of this Court, the Court saw no justification for the respondent’s request that costs not follow the event, nor for depriving the appellant of a costs order. Consequently, the Court allowed the appeal, reversed the common judgment of the High Court in the three appeals, and allowed the petitions for review—C.M.P. 4672, 4673 and 4674 of 1959—both here and in the High Court, directing that one set of hearing fees be awarded as costs. The appeal was thus allowed.