Rajasthan High Court - Jaipur
Commercial Taxes Officer, Anti Evasion vs M.R.F. Limited on 30 April, 2007
Equivalent citations: (2007)10VST108(RAJ)
Author: Vineet Kothari
Bench: Vineet Kothari
JUDGMENT Vineet Kothari, J.
1. The question that arises for consideration by this Court in the present revision petitions filed by the Revenue is as to whether vulcanising solution used by the respondent-assessee in tyre retreading work is a synthetic adhesive taxable at the rate of 16 per cent or at general rate of 10 per cent which was charged and paid by the respondent-assessee.
2. The assessing authority imposed difference tax of six per cent on the sale value of such vulcanising solution holding the same to be taxable at the rate of 16 per cent purportedly under entry No. 91 of Notification, S. No. 713, S.O. No. 399 dated March 27, 1995 which entry reads as under:
91. Paints, pigments, enamels, cement based water colours, dry 16%" distempers, oil-based distempers, emulsion paints including acrylic and plastic emulsion paints, lacquers including cellulose lacquers, varnishes, all types of synthetic adheshes, all types of polish (other than boot-polish), turpentine oil, white oil, double boiled linseed oil, thinners, all kinds of paint removers and all kinds of wall papers.
3. The Deputy Commissioner (Appeals), however, allowed the appeal of the assessee and held that the vulcanising solution is a rubber compound and is not a synthetic adhesive, therefore, 10 per cent sales tax charged under the general residuary entry No. 100 of notification dated March 27, 1995 by the respondent-assessee was appropriate and since the Tax Board in another case had already held it to be so taxable at general rate of 10 per cent the appeal of the assessee was allowed by the learned Deputy Commissioner (Appeals). The Revenue took the matter further before the Tax Board but lost there also and the Tax Board affirmed the rate of 10 per cent on the said commodity following its judgment in appeal by one M/s. Vikrant Tyres Ltd., and the Tax Board also relied upon a ruling given by the Commissioner of Sales Tax, Maharashtra State, Bombay in exercise of its powers for determination of disputed questions where the learned Commissioner held that the kwik solution was a rubber vulcanising cement which is required for chemical bounding of the patches of tyres and tubes. Being aggrieved by the said order of the Tax Board, the Revenue has come up in the present revision petitions for two different periods before this court.
4. Mr. R.B. Mathur, learned Standing Counsel for the Revenue, urged that undoubtedly the vulcanising solution was used by the respondent-assessee for sticking together of two sheets of rubber for retreading of tyres and the compound of the vulcanising solution comprised of natural rubber, polymer, rubber compound and solvent and, therefore, it was nothing but synthetic adhesive used for sticking together of sheets of rubber and was, therefore, taxable at the rate of 16 per cent. He, therefore, assailed the orders passed by the two appellate authorities below and submitted that the revision petitions deserve to be allowed and the order of the assessing authority deserved to be restored. He submitted that it is well-settled that common parlance test is the acid test for interpreting the taxability of a particular commodity and how a particular commodity is understood in the trade parlance by the persons concerned with that particular trade or business is the relevant factor. Relying on certain judgments of the apex court for this well-settled proposition of law of applying the common parlance test, he urged for allowing the revision petitions.
5. Mr. Alok Sharma and Mr. R.C. Shah on the side opposite submitted in the first instance that the relevant entry No. 91 quoted above made it more than clear that even assuming for a moment that the vulcanising solution was a synthetic adhesive, though they reserved their right to argue otherwise, did not include the vulcanising solution used for retreading of tyres in the said entry and applying the rule of interpretation of ejusdem generis the vulcanising solution used for retreading of tyres could not be taxed at 16 per cent under the aforesaid entry No. 91 of notification dated March 27, 1995 because the said entry would include only those types of synthetic adhesive which are used in the paint industry. Mr. Alok Sharma relied upon the settled rule of interpretation of ejusdem generis by reading para 12 of SCC (para 7 in STC) of Siddeshwari Cotton Mills (P) Ltd. v. Union of India which is quoted below for ready reference:
12. The expression ejusdem generis - 'of the same kind or nature' - signifies a principle of construction whereby words in a statute which are otherwise wide but are associated in the text with more limited words are, by implication, given a restricted operation and are limited to matters of the same class or genus as preceding them. If a list or string or family of genus-describing terms arc followed by wider or residuary or sweeping-up words, then the verbal context and the linguistic implications of the preceding words limit the scope of such words.
6. He further relied upon the judgment of the honourable Supreme Court in Pardeep Aggarbatti v. State of Punjab [1997] 107 STC 561 in which the view of the Bombay High Court in Commissioner of Sales Tax v. Gordhandas Tokersey [1983] 52 STC 381 was approved. The Bombay High Court noted that it was a well-known rule of construction that words in such entries had to be construed with reference to the words found in immediate connection with them. When two or more words which were capable of being understood in an analogous manner were coupled together, they had to be understood in the common analogous sense and not in the general sense. Applying this rule of noscitur a sociis, the word "perfumes" in the entry was to be understood in conjunction with "cosmetics" and "depilatories". In other words, the word "perfumes" referred only to such preparations as were commonly known in the market for use on the human body as perfumes. Approving the said Bombay view, the honourable Supreme Court held that "we are in no doubt whatever that the word 'perfumery7 in the said entry No. 16 draws colour from the words 'cosmetics' and 'toilet goods' therein and that so read, the word 'perfumery' in the said entry No. 16 can only refer to such Articles of perfumery as are used, as cosmetics and toilet goods are, upon the person. The word 'perfumery' in the context in which it is used has, therefore, no application to 'dhoop' and 'agarbatti'."
7. Therefore, the learned Counsel submitted that since admittedly the vulcanising solution was neither sold to paints industry in question nor they were being used in any manufacturing activity relating to paints nor in common parlance the said commodity was known in the trade as one relating to the paint industry. Therefore, there was no question of imposing 16 per cent rate of tax on the said commodity with reference to the aforesaid entry No. 91. They further submitted that there was no separate entry prescribing the rate of 16 per cent for the said vulcanising solution or all types of synthetic adhesives and, therefore, the assessee was justified in charging only the general rate of 10 per cent under residuary entry, since no other specific entry was available for applying 16 per cent rate of tax. Mr. R.B. Mathur, learned Counsel for the Revenue also could not point out any other specific entry providing for 16 per cent rate of tax for all types of synthetic adhesives.
8. Having heard the learned Counsel and after going through the relevant case law cited at the bar, this Court is of the opinion that there is no force in these revision petitions filed by the Revenue. That the commodity in question, vulcanising solution, is an adhesive is beyond the pale of doubt because it is used for sticking together two layers of rubbers in the tyre retreading industry of the respondent-assessee. The chemical composition of the vulcanising solution also indicates that they have the adhesive value in them. The rubber compound/polymers and solvent used along with natural rubber to make the vulcanising solution makes it a synthetic adhesive used for the purpose of sticking. But the question remains as to whether the same could be taxed at the rate of 16 per cent with reference to aforesaid entry No. 91 under notification dated March 27,1995. A bare and close reading of the said entry No. 91 clarifies the issue that it is only the synthetic adhesive used by the paint industry which are intended to be taxed at the rate of 16 per cent. The principles of ejusdem generis or noscitur a sociis are well-settled principles of interpretation and words of general and wider import used in an entry surrounded by other relevant terms have to draw its colour and meaning from such surrounding words and that cannot be lost sight of. Though this entry No. 91 as such was not referred by any of the authorities below and discussed in detail as to whether the same would apply to the commodity in question or not but this being the only relevant entry regarding synthetic adhesives providing for 16 per cent rate of tax and this being the only core question of law arising out of the order of the Tax Board and there being no other competing entry prescribing 16 per cent rate of tax exercised on synthetic adhesive, this question can very well be decided in the present revision petitions and this Court is of the opinion that there is no need to remand the case back to the appellate courts below for this purpose. Thus, going by the aforesaid rule of interpretation, this Court is of the opinion that the learned assessing authority was not correct in applying 16 per cent rate of tax on the commodity in question, i.e., the vulcanising solution with reference to entry No. 91 of notification dated March 27, 1995 and the appellate authorities were justified in setting aside such additional tax, interest and penalty thereon though for different reasons.
9. Accordingly, these revision petitions are dismissed and it is held that vulcanising solution was rightly taxable at general rate of 10 per cent under entry No. 100 and not at the rate of 16 per cent under entry No. 91 under the aforesaid notification dated March 27, 1995 during the relevant period. The revision petitions are accordingly dismissed with no order as to costs.