Delhi High Court
Anchor Electricals (P) Ltd vs Commissioner Sales Tax on 20 March, 2014
Author: S.Ravindra Bhat
Bench: S. Ravindra Bhat, R.V. Easwar
$~27
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% DECIDED ON: 20.03.2014
+ ST.APPL. 45/2012
ANCHOR ELECTRICALS (P) LTD ..... Petitioner
Through: Mr.Aseem Mehrotra, Adv.
versus
COMMISSIONER SALES TAX ..... Respondent
Through: Mr.V.K.Tandon, Adv.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.V. EASWAR MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)
1. Admit.
2. The following question of law arises for consideration:
3. Did the Tribunal fall into an error in interpreting Entry 40 Schedule-III of the Delhi Value Added Tax Act, 2004 in holding that the HSN/CET nomenclature indicated in the circulars issued by the tax authorities on 16.09.2005, 17.02.2006 and 20.03.2006 would prevail in respect of classification of the article in question.
4. The appellant (hereinafter referred to as "the dealer") manufactures various categories of cables including industrial cables.
St.Appl.45/2012 Page 1 It is contended that these articles were properly classifiable under Entry No.40 to the Schedule-III which reads as follows:
"Industrial Cables/High Voltage Cables, XLPE, Jelly filled Cables, Optical Fibres"
5. The assessee referred this question to the Commissioner, DVAT under Section 84 of the DVAT Act specifically on the issue as to what would be the rate of VAT chargeable on such industrial cables. The Commissioner in the determination made on 22.02.2009, seeking recourse to the three circulars - mentioned in the question of law framed earlier held that since there was a specific reference to HSN/CET entries in those documents, the industrial cables were classifiable under the relevant residuary entry in the Schedule IV of the DVAT Act thus attracting a higher rate of duty i.e. 12.5% as against the 4% chargeable under Entry 40 to the Schedule III (which has now been revised to 5%). The appellant-dealer appealed to the Tribunal contending that in previous determinations the consistent view of the Commissioner-though in respect of other articles - was that wherever the statute expressly referred to CET or HSN headings, then alone would those references is prevail and in other cases "the common parlance" view had to be applied. In support of this contention the appellant relied upon orders of the Commissioner in Section 84 determinations in Techno (P) Ltd. dated 16.10.2008 and in M/s Netlab Solutions Inc. In both these determinations the concerned Commissioners had ruled that if the statute expressly referred to CET/HSN descriptions the tax administrators would be bound by it St.Appl.45/2012 Page 2 and correspondingly in the absence of such express reference the common parlance test had to be applied. The Commissioner however did not accept the dealer‟s arguments on this score in this case which led to an appeal to the Tribunal.
6. The impugned order contains a duality of opinions; the Chairman accepted the contentions of the dealer-appellant and relied upon certain rulings including that of the Bombay High Court in Commissioner of Sales Tax v. Dev Enterprises Ltd., (2011) 42 VST 504 (Bom). It was held further that the circulars which the Commissioner had relied upon could not be binding, at any rate could not prevail over the express terms of the statute. The minority opinion of the Chairman also relied upon other judgments. The majority view however by its reasoning upheld the determination of the Commissioner and found no infirmity with it.
7. Learned counsel for the dealer-appellant contended that the majority opinion is contrary to the statute itself inasmuch as it has upheld the interpretation largely guided by the circulars. Learned counsel pointed out that Entry No.40 expressly mentions "industrial cables" and describes it further as inter alia "Industrial Cables/High Voltage Cables, XLPE, Jelly filled Cables, Optical Fibres". In these circumstances the clarification made by the circulars which alluded to the HSN/CET provisions could not prevail. Learned counsel emphasises that circular No.51/2005-06 made an express subtraction, in that it excluded "non-industrial cables and wires" which were specifically the subject matter of Entry No.40. Learned counsel also St.Appl.45/2012 Page 3 relied upon the same judgment of the Bombay High Court in Dev Enterprises Ltd. (supra) and stated that the said decision supports the appellant-dealer in entirety.
8. The Revenue submits that the majority opinion reflects the correct interpretation inasmuch as it upholds the determination applied in a general, uniform and non-discriminatory manner. It was contended that the definition of "industrial cables" in the Electricity Act is purely technical and cannot be imported into any statutory authorization. Counsel further contended that once the intent of the Legislature is taken into consideration and circulars are issued for uniform applications those have to be usually deferred. It was contended that Dev Enterprises Ltd. (supra) does not in fact support the assessee in this case because the predominating usage, while determining the classification, has to be looked into. The department while issuing three circulars, which in essence were upheld by the impugned determination, was to explain what was meant by "industrial cables" and were not covered by it. The assessee‟s products were clearly not covered by the exhaustive enumeration which in turn coincided with the HSN/CET references. Consequently the goods in question fell in the residuary entry and not under Entry No.40.
9. In this case, it was noticed that earlier the express terms of the statute clearly referred to „industrial cables‟. The Statute does not stop there. Rather, it goes on to enumerate other categories of industrial cables such as „Industrial Cables/High Voltage Cables, XLPE, Jelly St.Appl.45/2012 Page 4 filled Cables, Optical Fibres‟. The circular of 16.09.2005 appears to be clarificatory and lists out 10 different kinds of cables and further enumerates that each one of that is classifiable under the Central Excise heading. At the same time, this Court cannot be oblivious of the fact that that Entry No.40 does not refer to any CET. Likewise, the Circular of 17.02.2000 describes what industrial cables are, and Circular No. 51 further limits the scope of various descriptions made in the first circular of 16.09.2005 by stating that such cables having cross sections of „core from 0.5 to 6.0 sq. millimetre‟ meant for non- industrial use underlying "would be classifiable under Entry No.40". It is apparent that the circulars in fact add to and also substitute from the main heading "industrial cables". This is because the Entry nowhere refers to any heading of the CET. Having not done so, the department appears to even cut down the amplitude of the description "industrial cables" by excluding non-industrial cables or wires of a certain width in the last circular No.51 of 2005-06.
10. Dev Enterprises Ltd. (supra) made an exhaustive and elaborate study of this aspect in the context of classification, and after taking note of certain prominent judgments of the Supreme Court such as Green Flashlight Industries Ltd. v. Union of India, (1985) 22 ELT 3 (SC), O.K. Play (India) Limited v. Commissioner of Central Excise, (2005) 4RC 293 (SC) and A. Nagaraju Bros. v. State of Andhra Pradesh, 1994 Supp. (3) SCC 12, held that where the statute expressly refers or alludes to other instruments or documents such as CET/HSN classifications, then alone would those classifications have to be St.Appl.45/2012 Page 5 looked into for the purposes of interpretation. In the absence of such express reference - in the parent statute - the reference through a circular, cannot guide the plain and commercial parlance meaning of the expression attributed to the article or goods in question. In this context this Court notices that various parts of the statute - the DVAT Act - contain specific and pointed references to HSN or Central Excise Tariffs. Illustratively the Entry No.48 (textile not including imported variety of textiles) makes specific reference to HSN Entry No.63.01, 02, 03, 04, 05 and 06 by way of exclusion; likewise Entry No.41A of the 3rd Schedule contains not less than 30 references enumerating various CET items e.q. CET heading No.8469-71, 8473, 8501, 8503- 05, 8517-18, 8520, 8522-25 etc. It is interesting to notice in this context that Entry No.41A as introduced was substituted by a notification and 4 notes were inserted at the same point of time. These notes read as follows:-
"Note:(1) The Rules for the interpretation of the provisions of the Central Excise Tariff Act, 1985 read with the Explanatory Notes as updated from time to time published by the Customs Cooperation Council, Brussels apply for the interpretation of this entry and the entry number 84 of this Schedule.
Note:(2) where any commodities are described against any heading or, as the case may be, subheading, and the description in this entry and in entry number 84 is different in any manner from the corresponding description in the Central Excise Tariff Act, 1985, then, only those commodities described in this entry and in the entry number 84 will be covered by the scope of this notification and other commodities though covered by the St.Appl.45/2012 Page 6 corresponding description in the Central Excise Tariff will not be covered by the scope of this notification.
Note:(3) Subject to Note (2), for the purpose of any entry contained in this notification, where the description against any heading or, as the case may be, sub-heading, matches fully with the corresponding description in the Central Excise Tariff, then all the commodities covered for the purposes of the said tariff under that heading or sub-heading will be covered by the scope of this notification.
Note: (4) Where the description against any heading or sub- heading is shown as "other", then, the interpretation as provided in Note 2 shall apply."
11. In view of the above provisions this Court is of the opinion that when there is clear guidance by the statute i.e. the DVAT Act as to in respect of which articles or goods the HSN and CET would have to be referred as part of the statute, it is not logical to import, for the purpose of interpretation, HSN/CET references to articles of goods which do not contain any such references. In the latter circumstance, as in the present case, "the common parlance test is applicable".
12. Now as to the circumstances of this case the assessee has relied upon the definition of "cable" in Section 2(g) of the Industrial Electricity Rules; "voltage" in Section 2(av) of the Indian Industrial Rules. These are extracted for facility of easy reference. Section 2 (2) of Central Electricity Authority (Furnishing of Statistics, Returns and Information) Regulations, 2007 defines "voltage". The relevant provisions are extracted below:
St.Appl.45/2012 Page 7 "Section 2(g) and 2(av) of Indian Electricity Rules, 1956 which defines cable and High Voltage Cables as under:
"(g) "Cable" means a length of insulated single conductor (solid or stranded) or of two or more such conductors, each provided with its own insulation, which are laid up together.
Such insulated conductors may or may not be provided with an overall mechanical protective covering."
13. Voltage and High Voltage Cables are defined in Section 2 (av) as follows:
"2(av) "Voltage" means the difference of electric potential measured in volts between any two conductors or between any part of either conductor and the earth as measured by a suitable voltmeter and is said to be-
"low" where the voltage does not exceed 250 volts under normal conditions subject, however, to the percentage variation allowed by these rules.
"medium" where the voltage does not exceed 650 volts under normal conditions subject, however, to the percentage variation allowed by these rules.
"high" where the voltage does not exceed 33,000 volts under normal conditions subject, however, to the percentage variation allowed by these rules."
Section 2 (2) of Central Electricity Authority (Furnishing of Statistics, Returns and Information) Regulations, 2007 defines "voltage" as under:-
(2) "Voltage" means the difference of electrical potential measured in volts, between any two conductors or between any part of either St.Appl.45/2012 Page 8 conductor and the earth as measured by a suitable voltmeter and is said to be -
(a) "high voltage" where the voltage exceeds 650 volts but does not exceed 33000 volts under normal conditions; and
(b) "extra high voltage" where the voltage exceeds 33000 volts under normal conditions."
14. In the present instance the product i.e. industrial cables are described as having capacity of 1100 volts. There cannot be any dispute that the Indian Electricity Act and the Electricity Supply Act as well as the Rules and Regulations framed under these enactments would guide and regulate the technical aspects which traders and those dealing with these articles understand. Such being the case when the statutory determination under the relevant law itself having classified 1100 volts cables as high voltage cables, there cannot be any difficulty in accepting the dealer‟s contention that the subject goods are industrial cables and are classifiable under Entry No.40 of the Schedule-III.
15. In view of the above conclusions, the question of law framed is answered in favour of the assessee. The appeal has to succeed and therefore is allowed for the above reasons.
S. RAVINDRA BHAT (JUDGE) R.V. EASWAR (JUDGE) MARCH 20, 2014/mm/ St.Appl.45/2012 Page 9