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State of AP v/s Linde (India) Ltd: The Literal Rule of Interpretation: Primacy of General Meaning

The democratic system is built on the doctrine of separation of powers which advocates for independence in working for legislature, executive, and judiciary. The Indian Constitution inherently provides the doctrine, a place, in the basic structure of the Constitution. The three organs of government work independently with overlapping powers.

Laws are, plainly, a set of rules enacted by the legislature for maintaining order in society, encompassing a wide array of possibilities. It is implausible for the legislature to even illustrate the possibilities. This lacuna is erased by the judiciary by interpreting the laws and applying them based on the circumstances.

The courts have to act with due diligence in the process of interpretation and application, keeping in mind the intention of the legislature while enacting the concerned law. Some vital considerations include - the statute should be read as a whole, ut res magis valeat quam pereat, harmonious construction, etc. There are three rules of interpretation � literal rule, golden rule, and mischief rule.

The present case analysis focuses on the application of the 'Literal Rule of Interpretation' in the case of 'State of AP v. Linde (India) Ltd.' The courts construe the statute according to the plain, literal, and grammatical meaning of it.

Linde India Ltd. (formerly BOC India Limited), the respondent, is a registered company under the Andhra Pradesh Value Added Tax Act, 2005. The respondent is in the business of manufacturing and trading industrial gases as well as Medical Oxygen IP, and Nitrous Oxide IP.

The Commercial Tax Officer, the appellant, after assessment, communicated to the respondent an outstanding tax liability of ₹5,11,062 as due and payable for a certain period for the above products. The appellant treated the products as leviable under Schedule V of the Act while the respondent contented, they are leviable under Entry 88 of Schedule IV of the Act. An appeal was thus preferred before the Appellate Deputy Commissioner and the contention of the tax officer was upheld.

The matter, then, went to the Sales Tax Appellate Tribunal which allowed otherwise. It was further challenged before High Court and it eventually was presented before the Supreme Court for adjudication on the contention that the application of the principle of 'ejusdem generis' cannot be used by the court in the instant circumstances.

  1. Whether the expression "substances" means things or products not used as medicine but for treatment?
  2. Whether the expression "and" need to be read disjunctively or conjunctively?
High court's decision
The Andhra Pradesh High Court was of the view that the expression "drugs" in Section 3(b)(i) of the Drugs and Cosmetics Act, 1940, covers within its ambit any substance which is used for or in the treatment, prevention, and mitigation of a disease or a disorder. Medical Oxygen IP is used for the treatment of patients and to mitigate the intensity of diseases and disorders and Nitrous Oxide IP is used as an anaesthetic in surgical operations and procedures of a short duration based on its reliance on the 'Inox Air Products Ltd. v. CCT'[1].

Supreme court's decision
The division bench consisting of D.Y. Chandrachudh and Ajay Rastogi, JJ., held that Entry 88 includes drugs, and medicines, whether patent or proprietary as defined in clauses (i), (ii), and (iii) of Section 3(b) of the Drugs and Cosmetics Act, 1940. Any drug or medicine that falls within that ambit would fall under Schedule IV.

The given definition of "drugs" under the Act is comprehensive enough to take in not only medicines but also substances intended to be used for or in the treatment of diseases of human beings or animals. The appropriate meaning of the term "substances" was concluded to be "things". The Supreme Court's decision was based on the Literal Rule of Interpretation.

The stipulated definition was plain, simple, and not ambiguous at all. Additionally, the expression "and" is to be read as "or" to carry out the intention of the legislature. Thus, Medical Oxygen IP and Nitrous Oxide IP fall within the ambit of Section 3(b)(i) of the 1940 Act and are consequently covered in Entry 88 of the 2005 Act.

The literal rule of interpretation
The Literal or Grammatical Rule of Interpretation is the primary rule of interpretation. It is a trite principle of interpretation that the words of a statute must be construed according to the plain, literal, and grammatical meaning of the words. The words should be understood in their natural, ordinary, or popular sense unless that leads to absurdity, or the context suggests otherwise.

In this rule, the courts must adopt the meaning consistent with the purpose of the statute and don't make the provision redundant. The meaning could be modified, extended, or abridged only to avoid any inconvenience and no further.[2]

There are certain rules such as Ejudem Generis, Casus Omissus, and Expressio Unius Est Exclusio Alterius to be followed for the application of the Literal Rule of Interpretation. The rule enables a common man to understand the law as the intent of the legislature is seen from the common parlance meaning of the words used. But it might lead to absurdity and ambiguity and the intent of the legislature is not clear from the statute alone.

Application of literal rule
The common parlance meaning of the term "medicine" is characterized by its curative properties in general and specifically, its use for or in the diagnosis, treatment, mitigation, or prevention of any disease or disorder.[3]

Nitrous Oxide is used in surgery and dentistry for its anaesthetic and analgesic effects[4], while Medical Oxygen with 99.9% purity is predominantly used in hospitals. Medical Oxygen is also used for the treatment of patients and to mitigate the intensity of disease or disorder in human beings. It is utilized to prevent a sudden collapse of patients and to aid in the recovery of health. Medical Oxygen is administered in resuscitation, major trauma, anaphylaxis, major haemorrhage, shock, and active convulsions, amongst other conditions.[5]

Clause (i) of Section 3(b) of the 1940 Act defines drugs as all medicines for internal or external use and substances intended for given purposes. The expression substances can be construed to include something other than medicines that are used for treatment based on 'Chimanlal Jagjivan Das Sheth v. State of Maharashtra'[6]. Thus, if a product other than medicine is intended to be used for or in the diagnosis, treatment, mitigation, or prevention of any disease or disorder, the same would be a "substance" falling within the ambit of the section.

Upon plain reading of Section 16, along with the Second Schedule and the specification of Medical Oxygen in the Indian Pharmacopoeia lends support to the contention raised by the respondent and it can be deduced that Medical Oxygen IP is a drug as defined in Section 3(b)(i) of the Act.

Laws are enacted by the legislature in general, conventionally, as an umbrella for all possible cases. It is the duty of the courts to deduce the meaning of the statute and apply the same to the particular facts before them for adjudication. The primary rule of interpretation is the Literal Rule in which the judge has to consider only the plain meaning of the statute without any ambiguity.

The intention of the legislature is clear from the general meaning of the terms used in the provision. The words must be understood in their natural, ordinary, or popular sense unless the context suggests otherwise.

  1. Inox v. Cct, 2014 SCC OnLine Hyd 857.
  2. State of HP v. Pawan Kumar, (2005) 4 SCC 350.
  3. State of Goa v Leucoplast (India) Ltd., (1997) 4 SCC 82.
  4. K D Tripathi, Essentials of Medical Pharmacology 278 (7th edn.).
  5. Southern Gas Ltd v. State of Kerala, (2003) SCC OnLine Ker 285; Inox Air Products Ltd v CCT, (2014) SCC OnLine Hyd 857.
  6. Chimanlal Jagjivan Das Sheth v. State of Maharashtra, AIR 1963 SC 665.

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