Madhya Pradesh High Court
M/S Castrol India Limited vs Commissioner Of Commercial Tax on 26 September, 2017
Author: Alok Verma
Bench: Alok Verma
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HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE
DIVISION BENCH: HON'BLE MR. JUSTICE S. C. SHARMA &
HON'BLE MR. JUSTICE ALOK VERMA
Writ Petition No.164/2004
M/s. Castrol India Limited
Versus
Commissioner of Commercial Tax, M.P. & Others
Writ Petition No.5954/2007
M/s. Castrol India Limited
Versus
Commissioner of Commercial Tax, M.P. & Another
Shri P. M. Choudhary, learned Senior Counsel with Shri D. S.
Kale, learned counsel for the petitioner.
Shri Milind Phadke, learned Government Advocate for the
respondent/State.
O R D E R
th (Delivered on this 26 September, 2017) As per S. C. Sharma, J:-
Regard being had to the similitude in the controversy involved in the present cases, the writ petitions were analogously heard and by a common order, they are being disposed of by this -2- Court. Facts of Writ Petition No.164/2004 are narrated hereunder.
02- The petitioner before this Court is a Company registered under the Companies Act, 1956 has filed this present petition being aggrieved by order dated 21/03/2003 (Annex.-'M') passed by Additional Commissioner of Commercial Tax, State of Madhya Pradesh in a revision petition which was preferred against order dated 07/03/2002, which was an order passed in first appeal under Section 62(1) of the Commercial Tax Act, 1994.
The appeal was arising out of orders dated 07/03/2002 and 24/04/2001 (Annex.-'L' and 'K') passed by the Deputy Commissioner of Commercial Tax and Assistant Commissioner of Commercial Tax, State of Madhya Pradesh.
03- The facts of the case reveal that the petitioner Company M/s. Castrol India Ltd. is a Company incorporated under the Companies Act, 1956. The Company was originally registered as "Indrol Lubricants and Specialities Private Limited"
and later on the name was change to "Indrol Lubricants and Specialities Limited". The name of the Company was subsequently changed as "Castrol India Limited".
04- The petitioner Company is a manufacturer of "Brake Fluid". In the State of Madhya Pradesh, the Madhya Pradesh -3- Commercial Tax Act, 1994 came into force w.e.f. 01/04/1995 and the petitioner Company is registered as a dealer under the provisions of Act of 1994. The Act of 1994 does not provide any specific entry in respect of levy of sales tax on "Brake Fluid", however, it provides for an entry i.e. Entry No.9 in Part-III of Schedule-II which reads as under:-
Entry No. Description of Goods Rate of Tax
9. Lubricants 15% 05- The Company, as the Brake Fluid does not fall under the description of the goods i.e. Lubricant, was paying Commercial Tax under the residuary entry being Entry No.1 of Part-VII of Schedule-II which reads as under:-
Entry No. Description of Goods Rate of Tax
1. All other goods not 15% included in Schedule-I or any other part of this Schedule 06- In respect of Assessment Year 1991-92, the Sales Tax Department accepted the payment of tax by treating the Brake Fluid under the residuary entry. However, the Commissioner of Sales Tax in the case of M/s. Brakes India Ltd. took a view that "Brake Fluid" is chargeable as Sales Tax under Entry No.7 Part-III of Schedule-II of the M. P. General Sales Tax Act.-4-
07- The petitioner on 22/02/1995 filed an application before the Commissioner of Sales Tax, Indore under Section 42- B of the M. P. General Tax Act, 1958, which was in force at the relevant time as well as M. P. Commercial Tax Act, 1994 w.e.f. 01/04/1995, for determination of rates of Sales Tax in respect of Brake Fluid.
08- The application of the petitioner was not decided and the new Act came into force and the Commissioner of Commercial Tax by an order dated 07/04/1995 intimated to the petitioner that Brake Fluid falls under Entry No.7 Part-III of Schedule-II which is related to lubricants and is chargeable to Sales Tax @ 12% up to 31/03/1994 and @ 15% w.e.f. 01/04/1994. The order passed in the case of M/s. Brakes India Ltd. was followed by the respondents.
09- The petitioner being aggrieved by the order dated 07/04/1995 requested the Commissioner to grant them an opportunity of hearing as the order was passed without hearing them, however, the petitioner received a letter dated 18/04/1995 informing that their application has been rejected. The petitioner thereafter, preferred a writ petition i.e. Writ Petition No.259/1996 and while the petition was pending the Commissioner, Commercial Tax Department continued with the assessment -5- proceedings for subsequent years also imposing tax by treating Brake Fluid as Lubricant.
10- The assessment for the period w.e.f. 01/04/1997 to 31/03/1998 was completed and an order was passed on 24/04/2001 by the Assistant Commissioner, Commercial Tax, Division No.1. An appeal was preferred by the petitioner and the appeal was decided against the petitioner by an order dated 07/03/2002. Thereafter, revision petition was preferred under Section 62(1) of the Commercial Tax Act and the same was dismissed on 21/03/2003. The petitioner has prayed for quashment of all three orders passed by the respondents by which the levy of tax in respect of Brake Fluid has been done by treating the Brake Fluid as Lubricant.
11- The petitioner's contention is that Brake Fluid cannot be categorized as Lubricant and therefore, Sales Tax / Commercial Tax cannot be charged by treating as a Lubricant. The petitioner has also raised a ground in respect of composition of Lubricant as well as of Brake Fluid and the stand of the petitioner is that Brake Fluid, by no stretch of imagination, can be treated as Lubricant.
12- The respondents have filed a reply and the respondents have stated that Brake Fluid has to be treated as -6- Lubricant and tax has rightly been charged by treating Brake Fluid as Lubricant as mentioned in the Entry No.9 Part-II of Schedule-II. The respondents have stated that functions of the Lubricant and Brake Oil are almost identical. The Lubricant reduces the friction, wear and tear in different parts of the machine and the Brake Oil also reduces friction in brakes and therefore, the Brake Oil can not be treated as a separate entry and it has to be treated as a Lubricant for all purposes. 13- The respondents have also placed reliance upon an order passed by Commissioner, Commercial Tax dated 21/06/1994 in respect of M/s. Brakes India Ltd. The respondents have stated that earlier also in past they have considered the factum of distinction between Lubricant and Brake Fluid and Commissioner has rightly passed the order in exercise of power conferred under Section 42-B of M. P. General Sales Tax Act, 1958 on 21/06/1994 in the case of M/s. Brakes India Ltd. keeping in view the function and viscosity present in lubricants and Brake Fluid.
14- It has also been stated that earlier order passed by the Commissioner in matter of M/s. Brakes India Ltd. dated 21/06/1994 holds the field and the question of taking a different view by the department does not arise. Respondents have further -7- stated that by giving different nomenclature to different type of lubricants, it can never be presumed that Brake Fluid does not fall under the category of Brake Oil and the Brake Fluid and Lubricant perform the same function in different parts of the engine and the basic character and composition is same in both the cases.
15- The respondents have stated that question of charging tax by treating the product falling under the residuary Entry No.1 of Part-VII of the Schedule-II does not arise. It has been further stated that in common parlance all functional fluids are known from the word 'Lubricants' and therefore, the legislature has framed the entry for the word 'Lubricants' only. The respondents have prayed for dismissal of the writ petition. 16- Heard learned counsel for the parties as length and perused the record.
17- The basic question involved in the present case is that whether the tax can be charged in respect of Brake Fluid by treating it under Entry No.9 Part-III of Schedule-II which prescribes the rate of tax in respect of description of goods as Lubricant @ 15% or tax has to be charged by treating the Brake Fluid under the residuary entry being Entry No.1 of Part-VII of Schedule-II which is @ 8%.
-8-18- In order to resolve the controversy, it has to be decided whether the Brake Fluid falls under the category of Lubricant or not. The various dictionaries have defined the Lubricant and normally the Lubricant is a substance, usually organic, introduced to reduce friction between surfaces in mutual contact. The Lubricant is always used for reducing friction. The basic distinction between Lubricant and Brake Fluid are as under:-
"i) Water Solubility:
Brake Fluid is soluble in water, whereas lubricant is not soluble in water.
ii) Flash Point:
Universal brake fluid has flash point of 620C whereas flash point of lubricant i.e. CRB Pluc 20W/40 is 1000C. Iii) Brake Fluid should not contain a trace of Lub. Oil because it affects the Rubber parts in the Brake system.
iv) Brake Fluid is based on Solvent like Glycol equilibrium refluxing boiling point."
19- It is pertinent to note that under the Bombay Sales Tax Act, 1959, lubricants have been classified under Entry 8 whereas Brake Fluid is classified under the residuary entry and not under the Entry No.8 relating to lubricants. The position under Central Excise Tariff Act, 1985 also requires consideration and the same reads as under:-
"UNDER CENTRAL EXCISE TARIFF ACT 1985:
"lubricating oil" falls under Section V, Chapter 27 of the First Schedule to the Central Excise Tariff Act which deals with -9- "Mineral fuels, mineral oils and products of their distillation; bituminous substances, mineral waxes" and is defined as follows:
(h) "lubricating oil" means any oil, which is ordinarily used, for lubrication, excluding any hydrocarbon oil, which has its flash point below 93.3º C;
And is assessed as Tariff Item:
2710 19 80 - - - Lubricating oil Whereas on the other hand "brake Fluids" falls under Section VI, Chapter 38 of the First Schedule to the Central Excise Tariff Act which deals with "Miscellaneous Chemical Products"
and is assessed as Tariff Item:
3819 - HYDRAULIC BRAKE FLUIDS AND OTHER PREPARED LIQUIDS FOR HYDRAULIC TRANSMISSION, NOT CONTAINING OR CONTAINING LESS THAN 70% BY WEIGHT OF PETROLEUM OILS OR OILS OBTAINED FROM BITUMINOUS MINERALS.
3819 00 - Hydraulic brake fluids and other prepared liquids for hydraulic transmission, not containing or containing less than 70% by weight of petroleum oils or oils obtained from bituminous minerals:
3819 00 10 - Hydraulic brake fluids.
In view of the aforesaid, it is crystal clear that since both the "lubricating oil" and "brake fluid" are classified under two different sections and chapters of the first schedule to the Central Excise Tariff Act 1985 therefore both of them are altogether different products and "brake fluid" can not be classified under the head of "lubricating oil"."
20- Further more the functions and composition of both "Brake Fluid" and "Lubricating Oil" is totally different as clear from the undermentioned definitions of "Brake Fluid" and "Lubricating Oil" in various on-line dictionaries:-
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"Definition of Brake Fluid in various on-line Dictionaries: 1- As per http://www.dictionary.com/browse/brake-fluid:
The fluid used in a brake system to transmit pressure from the brake pedal to the pistons at each wheel, producing the braking action.
2- As per https://en.wikipedia.org/wiki/Brake_fluid:
Brake fluid is a type of hydraulic fluid used in hydraulic brake and hydraulic clutch applications in automobiles, motorcycles, light trucks, and some bicycles. It is used to transfer force into pressure, and to amplify braking force. It works because liquids are not appreciably compressible--in their natural state, the component molecules do not have internal voids and the molecules pack together well, so bulk forces are directly transferred to compress the fluid's chemical bonds. Most brake fluids used today are glycol-ether based, but mineral oil (Citroën/Rolls-Royce liquide hydraulique minéral (LHM)) and silicone (DOT 5) based fluids are also available.
3- As per https://www.merriam webster.com/dictionary/brake %20fluid:
The liquid used in a hydraulic brake cylinder. 4- As per http://www.thefreedictionary.com/brake+fluid:
An oily liquid used to transmit pressure in a hydraulic brake or clutch system.
5- As per https://en.oxforddictionaries.com/definition/us/ brake_ fluid:
Fluid used in a hydraulic brake system. 6- As per http://www.definitions.net/definition/brake%20fluid:
Brake fluid is a type of hydraulic fluid used in hydraulic brake and hydraulic clutch applications in automobiles, motorcycles, light trucks, and some bicycles. It is used to transfer force into pressure, and to amplify braking force. It works because liquids are not appreciably compressible -- in their natural state the component molecules do not have internal voids and the molecules pack together well, so bulk forces are directly
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transferred to trying to compress the fluid's chemical bonds. Most brake fluids used today are glycol-ether based, but mineral oil.
7- As per http://www.ldoceonline.com/Technology-topic/brake-
fluid: from Longman dictionary of contemporary English: Liquid used in certain kinds of brakes so that the different parts move smoothly.
8- As per http://www.oxfordlearnersdictionaries.com/ definition/ english/brake-fluid:
Liquid used in brakes to make the different parts move smoothly.
9 - As per http://dictionary.reverso.net/english-definition/brake %20fluid:
An oily liquid used to transmit pressure in a hydraulic brake or clutch system.
10 - As per http://www.my-cardictionary.com/brake/brake-fluid.
html:
Function:
The brake fluid must transmit the pedal force applied by the driver of a car to the wheel brakes. As soon as the driver presses the brake pedal, the force from his foot is exerted on the brake servo the via the pedal. The master brake cylinder converts the amplified foot force into hydraulic pressure. This hydraulic pressure is then transmitted to the wheel brakes via brake lines and brake hoses. The brake fluid acts as a transmission medium in this process. It must meet strict requirements. For example, it must not damage rubber seals. It must protect the components of the brake system against corrosion and wear and, above all, it must be temperature-resistant. This is because some of the heat generated during braking is transferred to the brake fluid. This results in high temperatures which, in extreme cases, can cause the brake fluid to boil. However, when the brake fluid starts to boil, the brake pedal slackens and the braking power drops significantly. When brake fluid boils, vapour locks are produced that can be compressed. Brake pulses are no
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longer sent to the wheel brakes, the brake pedal goes all the way to the floor and that dreaded moment when nothing happens at all occurs.
It is for this reason that the boiling point of a brake fluid is so important. We speak in terms of the dry boiling point and the wet boiling point. The dry boiling point describes the property of a new brake fluid that is still in its sealed container. It is usually between 240°C and 280°C. On account of its composition, brake fluid has hygroscopic properties. This means that it draws in moisture from its surroundings, primarily through the brake hoses. As a consequence, the water content of the brake fluid increases over time and the boiling point drops. The temperature known as the wet boiling point is reached at a water content level of 3.5%. Once this point in time has been reached, the brake fluid must be changed.
The actual boiling point of the brake fluid can be determined in a garage using a test device. This test should be carried out annually. To safeguard the function of the brake system, the quality of the brake fluid must meet the specifications defined by the vehicle manufacturer. Furthermore, the prescribed intervals for changing the brake fluid must be observed. The viscosity of the brake fluid is also very important. It is viscosity which safeguards the function of various brake systems. In modern control systems such as ABS or ESP®, very low viscosity is a prerequisite for absolutely reliable control processes in fractions of seconds. The hydraulic units in these systems have numerous small bores and channels, some of which are smaller than the diameter of a human hair. Selecting a brake fluid with the wrong viscosity can have fatal consequences for the function of modern brake systems.
Definition of Lubricating Oil in various online Dictionaries:
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1- As per https://www.merriam-webster.com/dictionary/ lubricating %20oil:
An oil (as a petroleum distillate or a fatty oil) used as a lubricant.
2- As per https://en.wikipedia.org/wiki/Lubricant:
A lubricant is a substance, usually organic, introduced to reduce friction between surfaces in mutual contact, which ultimately reduces the heat generated when the surfaces move. It may also have the function of transmitting forces, transporting foreign particles, or heating or cooling the surfaces. The property of reducing friction is known as lubricity. 3- As per http://www.thefreedictionary.com/lubricating+oil:
A thick fatty oil (especially one used to lubricate machinery).
4- As per http://www.mnemonicdictionary.com/word/lubricating %20oil A thick fatty oil (especially one used to lubricate machinery).
5- As per https://www.wordnik.com/words/lubricating-oil Any oil that is used or is suitable for lubrication; specifically, a thick oil produced in the process of refining paraffin-oil and petroleum."
The aforesaid discussion on Brake Fluid and Lubricants makes it very clear that by no stretch of imagination Brake Fluid can be treated as Lubricant. The function of both the liquids is different.
21- The Hon'ble Supreme Court in the case of Atul Glass Industries (P.) Ltd. Vs. Union of India reported in Sales Tax Cases (Vol-63) 322 has dealt with an issue in respect of imposition of Excise Duty and the case before the Hon'ble
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Supreme Court was in respect of Glass and Glassware. The issue was whether Glass and Glassware include Glass Mirror, Wind Screens, Rear Screens, etc. 22- The apex Court in the aforesaid case has held that a product is identified by its functional character. It was also held that it is a matter of common experience that the identity of an article is associated with its primary function and when a consumer buys an article, he buys it because it performs a specific function for him. The Glass Mirrors were held not to be included in item No.23A(4) of Schedule-I appended to Central Excise and Salt Act, 1944 which was relating to other Glass and Glassware. The apex Court in the aforesaid case has held as under:-
"A broad description of the process through which a glass sheet passes has been detailed earlier. It indicates clearly to our mind that the original glass sheet undergoes a complete transformation when it emerges as a glass mirror. What was a piece of glass simpliciter has now become a commercial product with a reflecting surface. Into the process of transformation have gone successive stages of processing with the aid of chemicals such as stannous chloride, silver nitrate and copper coating besides an entire range of physical proscesses involving polishing, washing, coating, drying, varnishing, evaporation and cooling. The evolved product is completely different from the original glass sheet. What was once a glass piece in its basic character has no longer remained so. It has been reduced to a mere medium. That is clear if regard is had to the fundamental function and qualities of a glass mirror. The power to reflect an image is a power
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derived not from the glass piece but principally from the silvering and other processes applied to the glass medium. If any part of the coating is scratched and removed, that particular area of the glass mirror will cease to be glass mirror. That simple test demonstrates the major importance attributable to the chemical deposit and coating which constitute a material component of a glass mirror. It is not mandatory that a mirror employed for the purpose of reflecting an image should have a glass base. Copper mirrors have been known from the dawn of history. In the modern age, acrylic sheets are sometimes used instead of glass for manufacturing mirrors. It is apparent, therefore, that a glass mirror cannot be regarded as a glass. For the same reason, it cannot be classified as 'glass ware', for 'glass ware' means merchandise made of glass and understood in its primary sense as a glass article. A glass bowl, a glass vase, a glass tumbler, a glass table-top and so on are all articles in which the primary component is glass. They are nothing more and nothing less. Any treatment of an ornamental nature applied to such articles does not derogate from their fundamental character as glass articles. It is quite the contrary in the case of a glass mirror. The case is more akin to that of carbon paper. A sheet of paper with a carbon coating thereon is employed for the purpose of producing copies of the original. The paper is a mere base while the function is performed by the carbon coating. This Court held in State of Uttar Pradesh v. M/s Kores (India) Ltd. [1977] (1) S.C.R. 837, that carbon paper could not be described as paper. It referred to the functional difference between the two, and pointed out that while paper would be understood as meaning a substance which was used for writing or printing or drawing on or for packing or decorating or covering the walls, carbon paper, which is manufactured by coating the tissue paper with a thermosetting ink based mainly on wax, non drying oils, pigments and dyes could not be so described.
The test commonly applied to such cases is: How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. Porritts
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and Spencer (Asia) Ltd. v. State of Haryana [1978] (42) S.T.C.
433. It is generally by its functional character that a product is so identified. In Commissioner of Sales Tax, U.P. v. Macneill & Barry Ltd., Kanpur [1985] (2) SCALE 1093. This Court expressed the view that ammonia paper and ferro paper, used for obtaining prints and sketches of site plans could not be described as paper as that word was used in common parlance. On the same basis the Orissa High Court held in State of Orissa v. Gestetner Dluplicators (P) Ltd. [1974] (33) S.T.C. 333 that stencil paper could not be classified as paper for the purposes of the Orissa Sales Tax Act. It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identified it in his mind. In the case of a glass mirror, the consumer recalls primarily the reflective function of the article more than anything else. It is a mirror, an article which reflects images. It is referred to as a glass mirror only because the word glass is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror. It was observed by this Court in Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan & Ors. [1980] (3) S.C.R. 1109. Which was a case under the Sales Tax law:
"In determining the meaning or connotation of words and expressions describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well- settled it is that the words or expression must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that consitutes the definitive index of the legislative intention when the statute was enacted."
That was also the view expressed in Geep Flashlight
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Industries Ltd. v. Union of India and Others. [1985]) (22) E.L.T.
3. Where the goods are not marketable that principle of construction is not attracted. Indian Aluminium Cables Ltd.v. Union of India and Others. [1985]) (3) S.C.C. 284. The question whether thermometers, lactometers, syringes, eye- wash glasses and measuring glasses could be described as 'glass ware' for the purpose of the Orissa Sales Tax Act, 1947 was answered by the Orissa High Court in State of Orissa v. Janta Medical Stores [1976]) (37) S.T.C. 33. In the negative. To the same effect is the decision of this Court in Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh, [1981] (3) S.C.R. 294. Where hypodermic clinical syringes were regarded as falling more accurately under the entry relating to "hospital equipment and apparatus" rather than under the entry which related to "glass wares" in the U.P. Sales Tax Act.
Reliance was placed by the Revenue on Commissioner of Sales Tax, U.P. v. Banaras Bead Manufacturing Co. [1970]) (25) S.T.C. 100. Where the Allahabad High Court held that glass beads could be described as 'glass ware for the purpose of a Notification issued under the U.P. Sales Tax Act. The decision of the High Court rested on the manner in which the contextual setting was altered in successive and different Notifications promulgated under the U.P. Sales Tax Act, indicating the content of the expression as developed through successive Notifications.
Our attention has been drawn on behalf of the Revenue to the circumstance that glass mirrors have been classified as 'glass and glass ware' in Chapter 70 of the Brussels Tariff Nomenclature. It seems to us that this circumstance can hardly advance the case of the Revenue, because the First Schedule to the Central Execises and Salt Act does not appear to have been modelled on the Brussels Tariff Nomenclature. There is nothing to show that the Tariff Items were classified in the Schedule on the basis of the Brussels Tariff Nomenclature. It was when the Customs Tariff Act, 1975 was enacted that the First Schedule to that Act was framed in accordance with the Brussels Tariff Nomenclature, evidently because the progress made in industrial growth and economic
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development, and the substantial changes in the composition and pattern of India's external trade called for the need to modernise and rationalise the nomenclature of India's Tariff in line with contemporary conditions. The glass mirrors were still not specifically mentioned under the Customs Tariff Act, 1975. They are now being brought in as such by the Customs Tariff Bill, 1985.
It is pointed out that glass mirrors have been classified by the Indian Standards Institution as "glass and glass ware"
in the glossary of terms prepared by it in respect of that classification. That, to our mind, furnishes a piece of evidence only as to the manner in which the product has been treated for the purpose of the specifications laid down by the Indian Standards Institution. It was a test employed by this Court in Union of India v. Delhi Cloth & General Mills, [1963] Supp. (1) S.C.R. 586, but was regarded as supportive material only of the expert opinion furnished by way of evidence in that case. The considerations to which we have adverted should, in our opinion, have greatly weighed in deciding the question raised in this appeal. So also in Union Carbide Co. Ltd. v. Assistant Collector of Central Excise and Others, [1978] E.L.T. 180, the description set forth in the publications of the Indian Standards Institution was regarded as a piece of evidence only. There were other more tangible considerations which weighed with the Court in reaching its conclusions.
We are firmly of the view that glass mirrors cannot be classified as 'other glass and glass ware' set forth in Tariff Item No. 23A(4), and must therefore fall under the residuary Tariff Item No. 69."
Thus, in short the apex Court has held that Mirror and Glass Mirror are not included in tariff item No.23A(4) as other Glass and Glassware though the department has treated Glass Mirror as Glass only.
23- In the case of Commissioner, Trade Tax, U. P.,
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Lucknow Vs. H. C. S. Comnet System Ltd. reported in [2014] 72 VST 383 (All), the Allahabad High Court was dealing with an issue relating to VSAT and the issue before the Court was whether VSAT (Very Small Aperture Terminals) and Satellite Receiver can be treated as one entry or the two item separately. The Allahabad High Court in the aforesaid case has held as under:-
"People dealing in electronic goods and items like VSAT and satellite receiver understand the two items separately. The functioning of "VSAT" and "Satellite receiver"
is different, their actual use is different, they are differently known by the people who deal therein, and work differently. It would not be correct to treat a "VSAT" as a "satellite receiver", so as to attract tax-ability under entry 75(i) of Notification dated January 29, 2000 issued under section 3A(1)(d) of the U. P. Trade Tax Act, 1948. Since it is not separately mentioned in entry 75(i) and 75(ii), it would be covered by entry 75(iii), being an item of electronic goods, not covered by any other item in entry 75 and would be taxable under entry 75(iii)." 24- The apex Court in the case of Commissioner of Sales Tax, U. P. Vs. Macneill & Barry Ltd. reported in Sales Tax Cases (Vol.61) 76 was dealing with an issue relating to Ammonia Paper or Ferro Paper. The apex Court by taking into account the meaning as per common parlance has held that Ammonia Paper and Ferro Paper does not fall within Entry the entry "paper other than hand-made paper".
25- The apex Court in the case of Commissioner of
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Central Excise, Delhi Vs. Carrier Aircon Ltd. reported in (2006) 9 STJ 292(SC) was dealing with an issue relating to classification of Chillers under Chapter Heading No.84.18 of the first Schedule of the Central Excise Tariff Act, 1985, and was held that chillers would not be classifiable under Chapter Heading No.84.15, meaning thereby, they cannot be a refrigerator even by testing it from commercial parlance test.
26- The Division Bench of Madhya Pradesh High Court in the case of Perfetti Van Melle India Pvt. Ltd. Vs. Asst. Commissioner of Commercial Tax & Others reported in (2011) 19 STJ 560 (MP) has decided an issued relating to payment of Commercial Tax in respect of chewing gum and bubble gum. The issue was that whether the chewing gum and the bubble gum were covered under the entry 'lozenges'. The High Court has arrived at a conclusion that chewing gum and bubble gum do not fall under the meaning of 'lozenges'.
27- The Division Bench of this Court in the aforesaid case in paragraph No.7 to 11 has held as under:-
"7. It is the settled position in law that while interpreting the entries in sales tax legislation, the words used in the entries must not be construed in any technical sense or from the scientific point of view, but as understood in common parlance. The words used by the Legislature must be given their popular sense meaning, i.e., the meaning which people conversant with the subject-matter with which the statute is
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dealing would attribute to it. For finding out the true meaning of the entries mentioned in the Sales Tax Act, what is relevant is not the educational meaning, but how those entries are understood in common parlance especially in commercial circles since sales tax primarily deals with dealers who are engaged in commercial activities. It is also the general principle that if a statute contains language which is capable of being construed in a popular sense, such a statute is not to be construed according to the strict or technical meaning of the language contained in it. (see Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S. Pai & Co. reported in [1980] 45 STC 58 (SC); [1980] 1 SCC 142, Ganesh Trading Co. Karnal v. State of Haryana reported in [1973] 32 STC 623 (SC); [1974] 3 SCC 620, Filterco v. Commissioner of Sales Tax, Madhya Pradesh reported in [1986] 61 STC 318 (SC); [1986] 2 SCC 103 and Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P., Lucknow reported in [1998] 111 STC425 (SC); [1998] 7 SCC 228).
8. Keeping in view the aforesaid, it is to be seen, if in the common parlance chewing gum and bubblegum are treated as "lozenges". Chewing gum and bubblegum not only have different ingredients, taste features and characteristics, but they are also items different from lozenges in common parlance inasmuch as a customer asking for chewing gums or bubblegums would not be given lozenges by a shop keeper.
9. The Supreme Court in the matter of Commissioner of Trade Tax, U.P. v. Associated Distributors Ltd. reported in [2008] 15 VST 39 (SC); [2008] 13 STJ 150, while holding that bubblegum is different from sweetmeat, has noted the distinguishing features of bubble gum as follows :
"9. If the ratio of the aforesaid judgment is properly comprehended then bubblegum in the common parlance cannot be construed as mithai (sweetmeat). When we apply common parlance test and in fact ask someone to bring the sweets from the market, he will never bring bubblegum. In common parlance, even items of confectionery will not be construed as sweetmeat (mithai). In fact, bubblegum
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is not an item for eating. It is kept in the mouth and after chewing the same is thrown out. The bubblegum while kept in the mouth by the children is also inflated as a balloon. In fact, it is used as a 'mouth freshener'. It is not made only of sugar. It contains gum base, vexes, etc., along with sugar.
10. According to wikipedia, the encyclopedia, bubblegum is a type of chewing gum especially designed for blowing bubbles.
11. The Commissioner, Sales Tax, U.P., has relied on the judgment in Nutrine Chewing Gum Products Co. Pvt. Limited, Lucknow [1985] STI 21 and observed that:
'In chewing gum, sugar is an almost insignificant . . . over it is not eatable. Its use is entirely different. Children use it just for a fun and athletes for controlling the breath. In common parlance also nobody treats it as an item of confectionery. I, therefore, hold that chewing gum is an unclassified item'."
10. The same issue had come up before the Full Bench of the M.P. Commercial Tax Appellate Board in the case of this very petitioner for another assessment period where the Full Bench of the Board, after examining the matter in detail, by order dated January 31, 2004 found that the lozenges and chewing gums/bubblegums are identified differently in common parlance. The Full Bench of the Board has held as under:
"14. One can say that toffee is a kind of firm or hard sweet softnery, which when sucked or chewed dissolves in the mouth. Lozenges a rhombus or diamond shaped figure, a small sweet or medicinal tablet orange also dissolves in the mouth. Chewing gum and bubblegum is not made by boiling sugar and butter and it also does not dissolve in the mouth. On the contrary after sucking or chewing it some
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rubber type material is left in the mouth. That is how the children and people in the popular sense or in common parlance identify these goods."
11. The Full Bench of the Board in the above order had also taken note of the scope of entry No. 21, Part IV of the Second Schedule and found that the bubblegums and chewing gums cannot be held to be covered under that entry as they are different from the items mentioned in that entry and therefore chewing gums and bubblegums fall in the residuary entry. The Full Bench held as under:
"17. In the present case the entry in question is neither headed by 'all kinds of confectionery' nor is ending with the word 'etc.'. Entry No. 21(ii) of part IV of the Second Schedule to the Act mentioned earlier, contains, biscuits, chocolates, toffees, lozenges and peppermint drops whether sold loose or in sealed containers are confectionary goods of same category being expressions taking colour from each other but bubblegum/chewing gums are confectionery goods of different category. It is accepted principle of law that in case of controversy of tax on commodities, one of the principles which is usually applied, is known as doctrine of 'noscitur a sociis'. i.e., where two or more words are stated together they are to be construed in a cognate manner. To put it differently, each word takes colour from each other. One application of the above general principle is the doctrine of 'ejusdem generis' which say that wherever the general words are followed by particular or specific words of same nature, the general words would take its meaning from the later specific word, however this is not the case in present appeal. Here the goods or items 'bubblegums' and 'chewing gums' neither find place at all in the entry nor the entry is head by 'all kinds of confectionery'. There- fore the above principle does not apply here.
18. In view of the above factual analysis, the rulings and principles propounded by the
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honourable Supreme Court of India in its various judgments, the Appellate Board has come to the conclusion that goods 'bubblegum' and 'chewing gum' cannot be covered in entry No. 21(ii) of part IV of the Second Schedule to the Act as these goods are quite different from those already mentioned in that entry. Therefore, they cannot be taxed at the rates prescribed for that entry goods. Consequently order dated July 5, 2001 and dated August 22, 2000 passed by the Appellate Deputy Commissioner and assessment officer, respectively, are set aside and the case is remanded to the assessment officer for passing fresh orders after verification treating these goods as residuary item, falling under entry No. 1 of Part VII of the Second Schedule to the Act unless he finds some other suitable entry for these goods."
The Division Bench of This Court has taken into account the doctrine of 'Noscitur a sociis' while deciding the aforesaid controversy.
28- The apex Court in the case of State of Jharkhand and Others Vs. LA Opala R. G. Ltd. reported in [2014] 70 VST 342 (SC) has again dealt with an issue of classification and has held that in the taxing statutes the terms and expression must be seen in their common parlance and not be attributed their scientific and technical meanings. The apex Court in the aforesaid case in paragraph No.26 has held as under:-
"26. It is a settled law that in taxing statutes the terms and expressions must be seen in their common and popular parlance and not be attributed their scientific or technical meanings. In common parlance, the two words "type" and "form" are not of the same import. According to the Oxford
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Dictionary, whereas the meaning of the expression "types" is "kind, class, breed, group, family, genus"; the meaning of the word "form" is "visible shape or configuration of something" or the "style, design, and arrangement in an artistic work as distinct from its content". Similarly, Macmillian Dictionary defines "type" as "a group of people or things with similar qualities or features that make them different from other groups" and "form" as "the particular way in which something appears or exists or a shape of someone or something."
Therefore, "types" are based on the broad nature of the item intended to be classified and in terms of "forms", the distinguishable feature is the particular way in which the items exist. An example could be the item "wax". The types of wax would include animal, vegetable, petroleum, mineral or synthetic wax whereas the form of wax could be candles, lubricant wax, sealing wax, etc."
29- Lastly the Hon'ble Supreme Court in the case of Ravi Prakash Refineries (P) Ltd. Vs. State of Karnataka reported in (2016) 29 STJ 50 (SC) was dealing with an entry under Central Sales Tax and has held that oil-cake and de-oiled cake are two different commercial products. The apex Court in the aforesaid case in paragraph No.17 to 20 has held as under:-
"17. Relying on the said passage, it is contended by Mr. Mehta that when identity of the goods on the basis of commercial parlance is similar, the High Court would have been well advised to follow the principles set out in the aforesaid decision and should not have been guided by the concept of enumeration in the Notification. In essence, the submission is that there is no distinction between the oil cake and the de-oiled cake and both should be perceived as one in commercial parlance. Thus, the emphasis is on the commercial parlance test. To bolster the said stand, reliance has been placed on M/s Habeeb Protiens case, wherein the Division Bench of the High Court of Karnataka has drawn a
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distinction between sunflower oil cake and groundnut oil cake on the one hand and de-oiled sunflower cake and groundnut oil cake on the other. The aforesaid analysis made in the said judgment should not detain us long, for Mr. Patil learned senior counsel for the State has brought to our notice a recent decision of this Court in the case of Agricultural Produce Market Committee vs. Biotor Industries Limited and Anr.[13] . In the said case, the two-Judge Bench had posed five questions and the question pertinent for our purpose reads thus:-
"13.4 Whether the Division Bench is justified in recording the finding on the second issue (see para 7, above at p.737 c-d) in connection with LPA NO. 195 of 2006 that the respondent concern is not liable to pay any market fee on the de-oiled cakes sold by it which are stated to be the by-product in the course of manufacturing castor oil which is not one of the items enumerated in the Schedule to the Act and the notification issued by the Directorate?"
18. Dealing with the distinction between the oil-cake and the de-oiled cake, the Court referred to the process and quoted from the findings referred by the learned Single Judge. Though the said decision was rendered in the backdrop of Gujarat Agricultural Produce Markets Act, 1963 to levy of market fee, it is absolutely distinctly perceptible from the judgment that the Court has arrived at a definite conclusion that there is a distinction between the oil-cake and de-oiled cake and they are two different commercial products. Thus, when the difference has been drawn by this Court, the assessee herein cannot be allowed to advance a plea that the said test should not be applied, but the commercial parlance test should be adopted to determine the said goods for the purposes of Central Sales Tax Act. To have a complete picture, we may refer to the Notification dated 31.05.2002. The relevant part of it reads as follows:
"In exercise of the powers conferred by sub- Section (5) of Section 8 of the Central Sales Tax, 1956 (Central Act 74 of 1956), the Government of Karnataka, being satisfied that it is necessary so to
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do in the public interest, hereby directs that which effect from the First day of June, 2002, the tax payable by a dealer under Section 8 of the said Act on the sale of goods specified below, made in the course of inter-State trade or commerce, to a registered dealer or the Government shall be calculated at the rate of two per cent subject to production of declaration in Form 'C' or certificate in Form 'D' duly filed and signed by the registered dealer or the Government to whom the said goods are sold:-
1. Cotton Yarn
2. Bicycles
3. Chemical fertilizers and chemical fertilizer mixtures
4. Edible oil - refined and non-refined
5. Khandasari Sugar
6. Liquid Glucose, Dextrine, Maixe Starch, gluten, grits, maize, husk, oil cake, corn steep liquor, dextrose, corn oil, maixe hydrol and maize germs."
19. From the said Notification, it is evident that the competent authority while exercising power under sub-section (5) of Section 8 of the CST Act, has kept the reduction of tax qua de-oiled cake from the purview of Notification and has only provided oil cake to be taxed at the reduced rate of tax. In view of the fact that the goods have distinct and different identity which also get recognition from the Notification, we are obliged to hold that the High Court has correctly distinguished the authority in M/s Sterling Foods (supra) and we unhesitatingly agree with the same.
20. Though we have agreed with the said conclusion of the High Court, yet the fact remains that the assessing authority had expressed the opinion with regard to the rate of tax on the de-oiled cake while scrutinizing 'C' Forms which is an expression of opinion on the available materials brought on record and, therefore, the first appellate authority as well as the tribunal was justified in concurring with the said order. It is
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worthy to note that the revenue had not challenged the order passed by the Joint Commissioner. The High Court has not expressed any opinion on this score. Considering the cumulative effect of the facts and law we have stated, we have not an iota of doubt in our mind that there should not have been reopening of assessment. However, the finding recorded by the High Court overturning the view of the tribunal that oil- cake and de-oiled cake are the same product and, therefore, both are liable to reduced rate of tax despite the notification only mentions oil-cake, is not defensible." 30- This Court in light of the aforesaid judgments is of the considered opinion that the Brake Fluid is a different kind of liquid altogether which is never used for the purpose of lubrication. Earlier the braking system in vehicles used to be mechanical braking system, like the braking system which we have in bicycle and the moment the pressure is applied to liver of the brake, it is transmitted mechanically to the brake pads which were fixed to the wheel of the vehicle as they are fixed at the wheel of the bicycle.
31- With passage of time Hydraulic Brake System came into existence and the Brake Fluid was introduced. The Brake Fluid perform the same job which was being performed by the mechanical system and it transfers the force on the brake pads fixed on the brake drums (Brake Shoe). It is not at all lubricating either the brake or any part which is under the braking system. Today we have pressure brake also which exclusively work on air
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pressure and if the logic canvassed by the State Government is considered then the State Government will charge Sales Tax on air also as lubricants because air is again being used in braking system in some of the modern age braking system. 32- In the considered opinion of this Court, by no stretch of imagination, Brake Fluid and Lubricant can be treated as under one entry and therefore, the impugned orders passed by the respondents dated 24/04/2001, 07/03/2002 and 21/03/2003 are hereby quashed. The amount, if any, recovered by the respondents by charging tax @ 15% be refunded back to the petitioner within a period of 90 days from the date of receipt of certified copy of this order. It is made clear that the respondents shall be free to charge Commercial Tax on the Brake Fluid by treating it as under the residuary entry being Entry No.1 of Part- VII of Schedule-II appended to the Madhya Pradesh Commercial Tax Act, 1994 @ 8%.
33- With the aforesaid, both the writ petitions are allowed on similar line. No order as to costs.
Certified Copy as per rules.
(S. C. SHARMA) (ALOK VERMA)
JUDGE JUDGE
Tej