Madras High Court
State Of Tamil Nadu vs Associated Engineers And Traders on 16 April, 1991
Author: A.S. Anand
Bench: A.S. Anand
JUDGMENT Dr. A.S. Anand, C.J.
1. Since identical questions of law and fact are involved in these three tax cases, which have been filed by the Revenue against the same assessee relating to the assessment years 1975-76, 1976-77 and 1977-78, they are being disposed of by this common order.
2. The assessee is a dealer in "submersible electrical pumps" and has been dealing in those goods since 1970-71. The assessee has been selling the goods, both to the public and to Government departments as also to local bodies under the directions of the Superintending Engineer of Highways and Rural Works. The assessee has been submitting the returns, as required by law, and the assessing officer in the assessment proceedings, treated those "submersible electrical pumps" as falling under item 41 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") and held the same as taxable at 9 per cent for the sales effected to the public while taxable at the concessional rate of 3 per cent up to October 4, 1977 and at 4 per cent from October 5, 1977, in respect of the pumps sold to "the Government departments, local bodies and recognised institutions", in view of G.O. No. 1064, Revenue, dated June 9, 1967. After the assessments were complete, it transpires that the assessing officer thought fit to revise the rate of tax as, according to his opinion, the concessional rate of tax had been wrongly levied. The tax liability was accordingly revised and tax was levied at 8 per cent under section 55 of the Act as against 3 per cent and 4 per cent earlier levied in the assessment proceedings by treating the goods as covered by item 41 and applying G.O. No. 1064. According to the assessing authority, the goods were covered by item 99 of the First Schedule. The assessee thereupon filed appeals before the Appellate Assistant Commissioner. It was asserted that since the assessee had charged sales tax at the concessional rate in the sale bills, in accordance with the earlier assessment proceedings right from 1970-71, wherein the goods were held covered by item 41, therefore, there was no justification to revise the assessments and call upon the assessee to pay sales tax at a rate at which it had never collected the same. It was argued that submersible electrical pumps fall under item 41 of the First Schedule and the concessional rate fixed in G.O. No. 1064, Revenue, dated June 9, 1967, was attracted in respect of the sales made to the Government departments, other institutions and local bodies. The case of the Revenue, on the other hand, before the appellate authority was that the goods supplied by the assessee fell under item 99 of the First Schedule and not under item 41 of the First Schedule. It was on that basis argued that since the case fell under item 99 of the First Schedule, the assessee was not eligible for the concessional rate covered by G.O. No. 1064, Revenue, dated June 9, 1967, as the concession in the said Government order was relatable only to the goods covered by item 41 of the First Schedule. The appellate authority negatived the submissions made on behalf of the assessee and opined that it was under a mistaken view of law that assessment had been made in the earlier orders by treating the goods to be covered under item 41 of the First Schedule and giving the benefit of G.O. No. 1064, Revenue, dated June 9, 1967, when submersible electrical pumps fall under item 99 of the First Schedule, taxable at 8 per cent. The appellate authority, however, noticed that for the assessment year 1974-75, the rate of tax from April 1, 1974 to August 14, 1974 was 7 per cent and from August 15, 1974 to March 31, 1975, it was 8 per cent. The proceedings were remanded to the assessing officer for effecting the correct rate of tax for the aforesaid two periods treating the goods to be covered by item 99 of the First Schedule. Aggrieved, the assessee filed second appeals before the Tamil Nadu Sales Tax Appellate Tribunal. The Tribunal found that the reopening of the concluded assessments, in the peculiar facts and circumstances of the case, relating to the years 1975-76, 1976-77 and 1977-78 was not justified. It was held that the revision of rate of tax in respect of the goods sold to the local bodies and Government departments for 1975-76, 1976-77 and 1977-78 at the direction of the Superintending Engineer of Highways and Rural Works could not have been reopened. The Tribunal, however, did not interfere with the revision for the assessment year 1978-79. The Tribunal found that the assessee, for a number of assessment years, had been permitted to charge concessional rate of tax for the sales made under the directions and with the approval of the Superintending Engineer of Highways and Rural Works and, therefore, it was not fair to reopen and revise the rate of tax, all of a sudden, and demand from the assessee the differential rate of tax on the goods already sold as, according to the Tribunal, that course offends equity and is hit by the doctrine of promissory estoppel. The Tribunal, however, did not consider or return any finding as to whether the goods in question were covered by item 41 or item 99 of the First Schedule. The Revenue, being aggrieved by the order of the Tribunal, is in revision in these three tax cases.
3. We have heard learned counsel for the parties.
4. Both the assessing officer, when he chose to revise and reopen the completed assessments, and the Appellate Assistant Commissioner found that the submersible electrical pumps sold by the assessee fell under item 99 of the First Schedule and not under item 41 of the First Schedule. It is not disputed before us that in case submersible electrical pumps fell under item 41 of the First Schedule, then, in respect of the sales made by the assessee to the Government departments or local bodies under the instructions of the Superintending Engineer, the concessional rate of tax, as fixed in G.O. No. 1064, Revenue, dated June 9, 1967, may be applicable but, in the event the goods fall under item 99 of the First Schedule, the benefit of G.O. No. 1064, Revenue, dated June 9, 1967 to the assessee would not be available. As already noticed, both the assessing authority and the first appellate authority held the submersible electrical pumps to be covered by item 99 and not item 41 of the First Schedule. The applicability or otherwise of the doctrine of promissory estoppel, which has been pressed into aid by the Tribunal, would depend upon the finding as regards the specific item under which the goods are covered. The Tribunal, however, opined as follows :
"..... The order of the assessing officer discloses that he has chosen to revise the rate of tax for 1975-76, 1976-77, 1977-78 and 1978-79 and while revising the rate of tax he has treated the submersible electrical pumps as falling under item 99 of the First Schedule taxable at 8 per cent. But if carefully examined it does not make much difference whether the impugned goods fall under item 41 or 99 of the First Schedule so far as the revision of tax is concerned. If the goods fall under item 41 they are taxable at 9 per cent single point and if the goods fall under item 99 they are taxable at 8 per cent single point tax. In our opinion therefore the only relevant point. that presents itself for consideration is whether the reopening and revision of tax for the goods supplied to the local bodies of the Government at the direction of the Superintending Engineer, Highways and Rural Works is justifiable. It is not known why the assessing officer all on a sudden has chosen to revise the rate of tax from the assessment year 1975-76 in respect of the sale of the goods to them. The contention of the appellant is that the goods have been sold at the concessional rate of tax to the local bodies of the Government at the direction of the Superintending Engineer, Highways and Rural Works from the assessment year 1970-71. It is obvious that the Governmental authority has permitted the appellant to charge such sale with concessional rate of tax till 1977-78 for the goods supplied to the local bodies of the Government and by reason of the approval and consent, the appellant has been lulled into the belief that concessional rate of tax has been alone applicable in respect of the goods supplied to the local bodies of the Government at the direction of the Superintending Engineer, Highways and Rural Works."
Thus, the Tribunal did not return any finding about the specific item of the First Schedule under which the submersible electrical pumps would fall, but it dealt with the issue in a different manner by applying the doctrine of promissory estoppel in favour of the assessee. It would, in our opinion, however, be advantageous at this stage to notice the two entries in the First Schedule to the Act to determine, under which specific entry the goods fall. Item 41 reads thus :
"All kinds of electrical goods (other than those specified elsewhere in this Schedule) including wires, holders, plugs, switches, casings, cappings, reapers, bends, junction boxes, meter boxes, switch boxes, meter boards, switch boards, electrical earthenware and porcelainware and parts and accessories of all such goods."
Item 99 reads thus :
"Power driven pumps (including motor pumps, turbo pumps and monoblock pumpsets) for liquids, whether or not fitted with measuring devices and parts and accessories which are generally adapted for use with such pumps.
5. The Deputy Commercial Tax Officer opined that submersible electrical pumps fall under item 99 of the First Schedule and do not fall under the category of "electrical goods" under item 41 of the First Schedule. The Appellate Assistant Commissioner observed that since item 41 of the First Schedule deals with all kinds of "electrical goods", therefore, the correct position regarding this submersible pumps is that the goods fall under item 99 of the First Schedule. The Sales Tax Appellate Tribunal, as already noticed, did not return any finding whatsoever as to the specific item in the Schedule under which submersible electrical pumps fall. In our opinion, the Tribunal fell in error in not first determining as to whether submersible electrical pumps fall under item 41 or under item 99 of the First Schedule. Of course, goods which fall under item 41 of the First Schedule are taxable at 9 per cent single point while the goods which fall under item 99 are taxable at 8 per cent single point, but the Tribunal lost sight of the fact that if the goods fall under item 41 of the First Schedule and the sale is made to the Government departments and local bodies under the directions of the Superintending Engineer, Highways and Rural works, then alone the concessional rate of tax, as prescribed by G.O. No. 1064, Revenue, dated June 9, 1967, may be attracted. The applicability or otherwise of the doctrine of promissory estoppel would only then need to be considered. It was, therefore, necessary for the Tribunal to first determine as to whether the goods fall under item 41 or under item 99 of the First Schedule. We shall, therefore, now consider, under which item of the First Schedule do the submersible electrical pumps fall.
6. Item 41 of the First Schedule covers all kinds of "electrical goods", other than those specified elsewhere in the Schedule. The words "other than those specifically mentioned in this Schedule" occurring in item 41 of the First Schedule were inserted by Act 11 of 1972 with effect from February 24, 1972. In order to attract item 41 of the First Schedule with effect from February 24, 1972, therefore, intrinsically the goods must be only "electrical goods" and must not be covered by any other item specified elsewhere in the Schedule. Item 99 of the First Schedule covers "power driven pumps (including motor pumps, turbo pumps and monoblock pumpsets) for liquids". Submersible electrical pumps are power driven and operate on electricity and are generally used for pumping water. Since item 99 of the First Schedule covers power driven pumps, the appropriate item under which "submersible electrical pumps" would fall would be item 99. What is the definition of "electrical goods" has not been spelt out in the Act itself. Words which are not defined in a taxing statute but are words of everyday use, must be construed not in their scientific or technical sense but as understood in the common parlance. "Electrical goods" mentioned in item 41 of the First Schedule would, therefore, cover only "electrical goods" and not such goods which operate with the help of electricity, particularly where such goods are covered by any other entry in the Schedule. "Submersible electrical pumps", keeping in view the use to which the pumps are put and the manner in which they are understood in the trade by those who deal with them as also by those who use them, in common parlance, are basically only pumps which are power operated. The characteristic of submersible electrical pumps is that they contain a section for lifting water with the aid of power. The nature of the goods is, therefore, similar to the nature of other power driven pumps, which have been classified in item 99 of the First Schedule. Merely because the motivation of the pumps is by electrical energy and the word "electrical" has been used between "submersible" and "pumps", it cannot be said that the pumps would be electrical goods, covered by item 41 of the First Schedule. "Submersible electrical pumps" can be clubbed and treated at par with the other power driven pumps classified under item 99 of the First Schedule. In our opinion, therefore, the assessing authority as well as the Appellate Assistant Commissioner were right in holding that "submersible electrical pumps" have to be subjected to levy of tax under item 99 and not under item 41 of the First Schedule and the Tribunal fell totally in error in the manner in which it dealt with the case. We, therefore, hold that submersible electrical pumps have got to be assessed under item 99 of the First Schedule to the Act and they cannot be classified under item 41 thereof. This being the position, the question of applicability of the doctrine of promissory estoppel to the facts and circumstances of the case is wholly irrelevant and misdirected. Section 16(1)(b) of the Act specifically provides that where, for any reason, the whole or any part of the turnover of business of a dealer has been assessed at a rate lower than the rate at which it is assessable, the assessing authority may, at any time within a period of five years from the expiry of the year to which the tax relates reassess the tax due after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity of showing cause against such reassessment. Where the provisions like section 55 and/or 16(1)(b) are attracted, it is not permissible for an assessee to invoke the doctrine of promissory estoppel as there can, indeed, be no estoppel against a statute. Like a plea of res judicata, equity also has no place against a taxing statute. An assessee cannot plead either to defeat the tax liability other Wise envisaged and permitted by the relevant taxing statute. The assessing authority as well as the appellate authority, in the circumstances rightly reassessed the assessee for the relevant assessment years by treating the "submersible electrical pumps" to fall under item 99 of the First Schedule. The Tribunal fell in complete error in applying the doctrine of promissory estoppel to the facts and circumstances of the case. The decision of the Tribunal, as we have earlier demonstrated, is based on a thorough misunderstanding and a wrong approach to the case. We, accordingly, allow the tax revision filed by the State and set aside the order of the Tribunal and restore that of the Appellate Assistant Commissioner. We, however, make no order as to costs.
7. Petition allowed.