Bombay High Court
Additional Commissioner Of Sales Tax, ... vs Afsons Industrial Corporation on 13 March, 1990
JUDGMENT T.D. Sugla, J.
1. These two sales tax references are at the instance of the department. The references arise out of the assessee's assessment for the period April 1, 1971 to March 31, 1972 and out of the order passed by the Commissioner of Sales Tax under section 52 of the Bombay Sales Tax Act, 1959, on an application dated April 17, 1974, by the assessee for advance determination of its liability in respect of sale of "mill board" under invoice No. 8 dated April 14, 1974. The appeals eventually came up before the Sales Tax Tribunal. By its impugned separate orders dated September 3, 1980, the Tribunal held that "mill board" was covered by entry No. 24(2) of Schedule C to the Sales Tax Act and the sales thereof were liable to sales tax accordingly.
The reasons given by the Tribunal in support of its conclusion, inter atia, were that though there was some distinction between "paper" and "board" in common parlance, factually "paper" was "thin board" and "board" was "thick paper". Having regard to the language used in the entry, "paper" included "board". There was not much difference between the manufacturing process of various types of boards such as straw board, grey board, mill board. There was a golden thread visible through a number of decisions given by the Commissioner of Sales Tax relied upon by the assessee's counsel which also suggested that the sweep of entry 24 was that it included all types of "paper" and all types of "board". For this purpose the Tribunal derived support from this Court's judgment in the case of Commissioner of Sales Tax v. Sultan Shev Co. [1977] 40 STC 583. The Tribunal lastly observed that had the intention of legislature been to restrict the scope of entry 24(2), the word "and" would have been used after the words "sand paper" and before "different kinds of board".
2. The Tribunal has referred to this Court identical question of law in the two proceedings. The question reads thus :
"Whether, on the facts and circumstances of this case and on a true and proper interpretation of entry 24(2) of Schedule C, was the Tribunal correct in law in holding that 'mill board' is covered by that entry 24 of Schedule C but is not covered by the residuary entry 22 of Schedule E ?"
3. It is noteworthy that entry 24 of Schedule C was modified on and from December 1, 1971, and also on and from October 1, 1972. Therefore, while for the purpose of answering the question for assessment covering the period from April 1, 1971 to March 31, 1972, the entry as it stood during that period will be relevant, for answering the question arising out of proceedings under section 52 of the Sales Tax Act, the entry as it stood on and after October 1, 1972, up to date will be relevant. The entry was sub-divided into sub-entry (1) and sub-entry (2) with effect from October 1, 1972, though there is no material difference between the entry before and after its division. It is for this reason that the Tribunal has perhaps inadvertently referred to entry 24(2) in the question arising out of both proceedings.
4. For the sake of convenience, entry 24 as it stood from time to time and entries 6 and 30 which have bearing on the question are reproduced hereunder :
January 1, 1960 to March 31, 1963 C6 Gunny bags and hessian; jute twine and brown paper and other paper adapted for use in packing goods.
C24 Paper, including newsprint but excluding paper specified in entry 6 in this Schedule.
C30 Strawboards and cardboards.
April 1, 1963 to August 31, 1969 C6 Gunny bags and hessian; jute twine.
C24 Paper of all kinds including strawboards, cardboard and duplex and triplex boards.
C30 Deleted.
September 1, 1969 to November 30, 1971 C24 Paper of all kinds including strawboards, cardboard and duplex and triplex boards (but excluding sand paper).
December 1, 1971 to September 30, 1972.
C24 Paper of all kinds including sand paper, strawboards, card-boards and duplex and triplex boards.
October 1, 1972 to till to-date C24 (1) Art paper, lustra cote art paper, sun coat, art card, art board, ivory card, chromo coated paper, cheque paper, imitation art paper, bible paper and silver cote art paper.
(2) Paper of all other kinds including sand paper, strawboard, cardboard and duplex and triplex boards.
It is evident that up to March 31, 1963 entry 24 covered only "paper". Brown paper and other paper adapted for use in packing goods were then covered by entry 6. Products such as strawboard and cardboard fell under entry 30. With effect from April 1, 1963, the legislature brought paper of all kinds including certain types of boards under entry 24. The changes effected with effect from September 1, 1969 and December 1, 1971, are not very significant inasmuch as "sand paper" excluded from the entry on September 1, 1969, was included in it on December 1, 1971. Through the division of the entry on October 1, 1972, into sub-entries (1) and (2), the legislative intention appeared to be to specify costly kinds of "paper" in sub-entry (1) and to make sub-entry (2) as a residuary entry for paper of all other kinds including four or five kinds of boards. However, entry 24 before its bifurcation from October 1, 1972 and thereafter as sub-entry (2) remained substantially the same, the only difference being that the word "other" was inserted between the words "paper of all" and "kinds" in the entry. For this difference there appears to be a good reason, viz., since sub-entry (1) referred to costly kinds of paper the sale of which was liable to higher rate of sales tax, the use of word "other" in sub-entry (2) indicated that the "paper" referred to in sub-entry (2) was also a kind of paper other than referred to in sub-entry (1).
5. The assessee had, it may be stated, enclosed a piece of "mill board" by way of sample along with its application and had stated that it was used for manufacturing paper cone for packing purposes. While there is no dispute about that use of the "mill board", we have seen the sample of the "mill board" and it appeared to us to be nothing but a kind of thick and comparatively rough paper. The "mill board" could easily be, in our view, used as cover for the exercise books, paperback books, etc.
6. Both before and after its bifurcation with effect from October 1, 1972, entry 24 and 24(2) covered paper of all kinds including sand paper, strawboard, cardboard and duplex and triplex boards. Evidently "mill board" is not covered in the entries as such. Therefore, the answer to the question will depend upon whether "mill board" is also a kind of paper or whether the other boards mentioned in the entries inclusively are illustrative and not exhaustive.
7. The assessee's case has all through been that the raw material as well as manufacturing process for making paper and board, particularly "mill board" is the same. Though apparently these are two products, the use of "mill board" is not materially different from other papers. In any event, "paper" is held to include "mill board" under the Central Excises and Salt Act. The department's case, on the other hand, is that the "paper" having not been defined in the Sales Tax Act, it should be given a meaning by which it is known or understood in common parlance and/or trade and commerce. The assessee, it was pointed out, had admitted and the Tribunal had found that "paper" and "mill board" were two distinct commodities. Paper, it was stated, was mainly used for printing, writing and/or packing purposes whereas the "mill board" could not be used for either of the above purposes unless converted into paper cones in the first instance. The entries 24 and 24(2) were stated to be exhaustive. Primarily the entries covered all kinds of paper and not all kinds of board. To the extent the entry included board, the entry was exhaustive and not illustrative. Relying on the Karnataka High Court decision in Business Forms Ltd. v. Commissioner of Commercial Taxes [1985] 59 STC 87, it was the case of the department that the classification of goods for the purpose of levy under the Central Excise Act furnished no guidance for determining the rate of levy under the Sales Tax Act.
8. It is pertinent to mention that the question as regards meaning of the word "paper" came up for consideration before the Supreme Court in the case of Collector of Central Excise v. Krishna Carbon Paper Co., [1989] 72 STC 280. It was observed :
"It is well-settled that where no definition is provided in the statute itself for ascertaining the correct meaning of a fiscal entry, reference to a dictionary is not always safe. The correct guide in such a case is the context and the trade meaning. The trade meaning is that which is prevalent in that particular trade where such goods are known or traded. If a special type of goods is the subject-matter of a fiscal entry, then that entry must be understood in the context of that particular trade, bearing in mind that particular word. Where, however, there is no evidence how the particular goods are understood in the particular market dealing with those goods, then the meaning following from the particular statute at the particular time would be the decisive test."
In its other decision in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer [1961] 12 STC 286 also, the Supreme Court observed that if a word was not defined in the Act and it was a word of every day use, it must be construed in its popular sense and not in any technical sense meaning "that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it." Again, in State of U.P. v. Kores (India) Ltd. [1977] 39 STC 8, the Supreme Court made similar observations. However, after referring to the meaning of the word "paper" in Encyclopaedia Britannica (Volume 13) (15th Edition) and in the unabridged edition of "The Randon House Dictionary of the English Language", the Supreme Court concluded :
"From the above definitions, it is clear that in popular parlance, the word 'paper' is understood as meaning a substance which is used for bearing writing, or printing, or for packing, or for drawing on, or for decorating, or covering the walls."
No doubt, the Karnataka High Court in Business Forms Ltd. v. Commissioner of Commercial Taxes [1985] 59 STC 87, observed that the classification of goods for the purpose of levy under the Central Excise Act did not furnish any guidance for determining the rate of levy under the Sales Tax Act. However, no guidance is available in the decision as to why and on what basis those observations were made. In our judgment, if the classification of goods under the Central Excises and Salt Act is also made in a similar manner and in the same context, there is no reason why decisions given under that Act cannot provide useful guidance for determining the question under the Sales Tax Act.
9. It is in this background that we have to consider whether "mill board" is paper within the meaning of entry 24 or 24(2) as the case may be. The word "paper" is admittedly not defined under the Bombay Sales Tax Act. All the same, it is a word of common use. In view of the Supreme Court decision Collector of Central Excise v. Krishna Carbon Paper Co. [1989] 72 STC 280, the word "paper" will have to be given a meaning by which it is commonly known in the context of "paper" trade. Under the U.P. Sales Tax Act also the word "paper" was not defined. Yet, referring to the definition of the word in dictionaries, the Supreme Court held in State of U.P. v. Kores (India) Ltd. [1977] 39 STC 8, that in popular parlance the word "paper" is understood as meaning a substance which is used for bearing writing, or printing, or for packing, or for drawing on, or for decorating, or covering the walls. Besides what was stated in the assessee's application dated April 17, 1971, under section 52 of the Act as regards the use of "mill board", on seeing the sample of "mill board" which was enclosed with the application (produced before the court by the counsel for the department at the behest of the court), we are inclined to hold that "mill board" manufactured by the assessee is nothing but a thick and rough paper which can be used for packing as well as for use as cover for the exercise-books and/or paperback publications. We, thus, agree with the Tribunal that "mill board" is a kind of paper falling under entry 24 and/or 24(2) as the case may be.
10. In Commissioner of Sales Tax v. Adarsh Paper and Board Manufacturing Company [1987] 65 STC 243, the Allahabad High Court held in so many words that the expression "all kinds of paper" covered "mill board". No doubt as pointed out by Shri Thakore, the High Court had derived support from the facts that the Tribunal had in that case recorded a finding that "mill board" was used for printing, drawing, packing, for file covers and for various other purposes and that in the orders the department had itself taken the "mill board" to be "paper". However, the decision did not entirely rest on those two findings. In fact the first sentence of the quotation from the Tribunal's order at page 249 is a sentence from the Supreme Court decision in State of U.P. v. Kores (India) Ltd. [1977] 39 STC 8. Moreover, when a similar question arose before the Supreme Court in the case of Maharaja Book Depot v. State of Gujarat , referring to the contention that exercise books cannot be considered as paper, it was observed :
"In substance, therefore, paper, whether lined or blank, means a material on which writing, printing, drawing, etc., can be done. In light of this meaning of the expression 'paper' the question is whether an exercise-book would be covered by that expression or not ? It cannot be disputed that an exercise-book is nothing but a collection of sheets of paper (blank or lined) stitched together by a piece of string or pinned together with pins of a stapler and is a substance used for writing and, therefore, would clearly fall within the item 'paper'. The test would be whether because of stitching or pinning them together such a collection of sheets loses its identity as paper. The answer must be in the negative. Looked at from this angle it is difficult to accept the contention that an exercise-book is a distinct commodity other than paper."
It can thus be reasonably inferred that the expression "paper of all kinds" is wide enough to cover "mill board" used for packing and/or as covers for exercise books and/or paperback publications.
11. Coming then to sub-entry (2) of entry 24, it is to be noted that sub-entry (1) of entry 24 covers eight kinds of paper, art board, art cards and ivory cards. These are admittedly costly kind of papers, cards and/or board. Sub-entry (2) opens with the expression "paper of all other kinds ............". The use of word "other" is not without significance. On the face of it it indicates that all items mentioned in sub-entry (1) are also kinds of paper including particular kind of cards and boards mentioned in the sub-entry and sub-entry (2) covers "paper of all other kinds", i.e., other than the kinds of paper covered by sub-entry (1). If that is so, there is no good reason why "mill board" should not be taken as covered by the expression "all other kinds of paper".
Assuming for the present that the items "strawboard, cardboard and duplex and triplex boards" following the expressions "including sand paper" in the sub-entry are exhaustive and not illustrative, the fact cannot be overlooked that the legislature did not mention the four kind of boards in the sub-entry with a prefix "and". If that was done, there would have been no ambiguity that the four kinds of board are not the same kind of a thing which could be treated as covered by the expression "all other kinds of paper". Nor has the legislature used the expression "means and includes" or "meaning and including" which again would have set the controversy at rest and made the entry exhaustive. The normal function of the word "including" in an entry, to our mind, is to indicate that the items following the word "including" are though of the type of the main item in the entry, there could be some doubt as to whether the main entry covered them or not and, therefore, the legislature specifically mentioned those items in the entry to remove scope for any doubt. In other words, the items so included with the prefix "including" would be of the type about which there could be some doubt as to whether they are covered or not by the main entry. The item about which there is no scope for doubt or there is comparatively less scope for doubt would accordingly stand automatically covered by the main items in the entry. Considering "mill board" from this point of view, we have no doubt in our mind that while strawboard, cardboard, duplex and triplex boards may or may not be covered by the expression "paper of all other kinds" except for their specific inclusion in the entry, there can be no doubt about "mill board" which is nothing but thick and rough paper and which is and can be used for packing purposes.
12. In the above view of the matter, the question is answered in the affirmative and in favour of the assessee. No order as to costs.
13. Reference answered in the affirmative.