Madras High Court
M/S.Electro Optics (P) Ltd vs The State Of Tamil Nadu Rep. By on 29 September, 2009
Author: B.Rajendran
Bench: F.M.Ibrahim Kalifulla, B.Rajendran
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED :29.09.2009
CORAM:
THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA
and
THE HONOURABLE MR.JUSTICE B.RAJENDRAN
Tax Case Nos.1834 of 2006, 2307 of 2008
and W.P.No.18770 of 2000
M/s.Electro Optics (P) Ltd.,
267, Kilpauk Garden Road,
Chennai.
: Petitioner in both Tax Cases.
Vs.
The State of Tamil Nadu rep. by
The Deputy Commissioner of Commercial Taxes,
Chennai.
: Respondent in both Tax Cases.
Prayer: Tax Cases Revision under Section 38 of the T.N.G.S.T. Act, 1959 against the order of the Sales Tax Appellate Tribunal (AB), Chennai, dated 03.12.1999 in T.A.Nos.759 of 1998 and 158/99 and C.O.P. Nos.258 of 1998 and 433/99 relating to the assessment years 1993-94 and 1994-95 respectively.
W.P.No.18770 of 2000
M/s.Electro Optics (P) Ltd.,
267, Kilpauk Garden Road,
Chennai.
: Petitioner in W.P.No.18770 of 2000
Vs.
1.The State of Tamil Nadu rep. by
The Deputy Commissioner of Commercial Taxes,
PAPJM Buildings, Greams Road,
Chennai - 600 006.
2.The Tamil Nadu Sales Tax Appellate
Tribunal (Addl. Bench), Chennai,
Rep. by the Secretary,
City Civil Court Buildings,
High Court Compound,
Chennai - 600 104.
3.The Commercial Tax Officer,
Kilpauk Assessment Circle,
Chennai.
: Respondents in W.P.No.18770 of 2000
For Petitioner : Mr.R.L.Ramani
Senior Counsel.
For Respondents : Mr.Haja Nasrudeen,
Special Government Pleader for Tax
C O M M O N O R D E R
B.RAJENDRAN,J.
The petitioner has filed these Tax Cases as against the order passed by the Sales Tax Appellate Tribunal in T.A.No.759 of 1998 and T.A.No.158 of 1999 along with C.O.P.No.258 of 1998 and C.O.P.No.433 of 1998, dated 03.12.1999.
2. Originally the Assessing Authority assessed the net taxable turnover at Rs.54,67,907/- including Rs.5,03,700/- representing first sales of machinery taxable at 8% as proposed in the pre-assessment notice which was taken twice while arriving at the total and taxable turnover, which was a mistake, the Assessing Authority therefore revised the assessment by adopting the correct sales turnover as under:
First sales of survey instruments Rs.49,64,207-00 First sales of spares and accessories of survey instruments at 16% Rs. 5,03,700-00 Miscellaneous income Rs. 46,642-00 Total and taxable turnover determined at 16% Rs.55,14,547-00 That apart the Assessing Authority levied a penalty under Section 12(3)(b). Similarly, for the year 1994-95 the Assessing Authority assessed a turnover of Rs.8,75,039/- at the rate of 16% treating the same as sales of survey instruments and also levied a penalty of Rs.1,92,603/- under Section 12(3)(b) and under Section 12(3)(c) a penalty of Rs.1,714/-. Aggrieved against this order, the appellant filed an appeal before the Appellate Assistant Commissioner and the learned Appellate Assistant Commissioner dismissed both the appeals. Aggrieved against that order, the appellants filed these Tax Cases and a Writ Petition before this Court. As all the matters are connected, all the three matters are taken up jointly by consent of parties.
3. The main contention of the learned Senior Counsel appearing for the petitioner is that the commodities dealt with by the petitioner are electronic equipments which are classified under entry 50 of Part B of First Schedule to the Tamil Nadu General Sales Tax Act and the correct assessable rate is only 3%. It was contended that the learned Appellate Assistant Commissioner erred in following a clarification issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai. It was contended that the electronic survey equipments dealt with by the petitioner herein cannot be treated on par with mechanical survey apparatus. It was also contended that the classification of a commodity is not to be determined according to the use to which it is put and he would rely upon a decision of the Apex Court reported in 42 STC 43 and also to a decision by Kerala High Court reported in 104 STC 44. It is further contended that the items dealt with by the petitioner are electronic theodolites whereas the entry 14 of Part F of the First Schedule contemplates only mechanical theodolites and survey instruments. Relying on the decision of the Apex Court reported in 70 STC 97, it was contended that all the items in a group should be considered in a generic sense. It was also contended that when a good was not defined in the Act it must be construed in a sense as understood in common parlance and added that in the commercial circles this commodity is understood as an electronic equipment only. It was further contended that in construing a taxing statute if the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax payer and if there is any doubt as to interpretation, it must be resolved in favour of the subject and accordingly pleaded for allowing the appeal. It was also contended that this item falls under special entry under the entry of electronic goods and not under the general entry of survey instruments under entry 14 of Part F. It was contended that the levy of penalty under Section 12(3)(b) is not proper inasmuch as there was no wilful evasion or contumacious conduct or infraction of law and therefore pleaded for deleting the penalty levied under Section 12(3)(b).
4. The learned Special Government Pleader contended that the data contained in the catalogue of the petitioner commodity is available in the assessment file and also contended that according to the catalogue the commodity dealt with by the petitioner is nothing but a survey instrument. It was further contended that when there were two entries, the special entry will cancel the general one and therefore, the entry 14 Part F of the First Schedule will override the general entry of other electronic goods. The learned Special Government Pleader relied on the decisions reported in 34 STC 153, 39 STC 194 and drew our attention to various case laws where the judicial forums upheld the interpretation that the specific entry excludes the general entry. In short, it was contended that the commodity was correctly assessed by the assessing authority and the same was upheld by the learned Appellate Assistant Commissioner and therefore, contended for dismissing the appeal. It is further contended that regarding the levy of penalty, it was pleaded that the levy was upheld by this Court in W.P.No.19218 of 1996, in the case of Chennai Textiles Chemicals Pvt., Ltd., Vs. State of Tamil Nadu and therefore pleaded for confirming the same.
5. Heard the learned Senior Counsel appearing for the petitioner as well as the learned Special Government Pleader appearing for the respondents.
6. The only question of law which was sought to be argued before this Court is whether the commodity dealt with by the petitioner falls under the classification of First Schedule Part B entry 50 or other electrical goods or under First Schedule Part F entry 14 theodolite, survey instruments as claimed by the Revenue and if so, whether it is assessable at the rate of 3% or 16% respectively. Consequently whether the penalty levied under 12 (3)(b) is maintainable.
7. We have heard the arguments in length to decide the issue in question taking into consideration the question of fact that admittedly the petitioner had imported survey instruments from M/s.Sokkia Company Ltd., Japan, and has sold the same in India as per copy of the bill of entry filed along with the assessment. The order of the Assessing Officer as well as the appellate authority reveals that the petitioner has declared the items imported as survey instruments before the Customs Authority also. The catalogue which was produced before the lower forum also was produced before this Court and as per the finding of the Tribunal and from the reading of the catalogue it clearly explains the nature of the commodity. It is also very clear from the catalogue itself that it comes under the category of survey instruments Set2C, Set3C and Set4C and it is called Intelligent Total Stations Series C. The imported instruments are as per clear finding of the Tribunal is a entirely new generation of survey instruments with innovative mechanical and electronic software additions and enhancements. As per the catalogue, the instruments also contain memory card and control panel for multiple functions of the movement. The survey system also consist of powerful telescopic laser theodolite which is used also for night surveying. In short, as per the catalogue and as per the finding of the Tribunal as rightly held that these instruments are intrinsical survey instruments only and there is no dispute also insofar as the conclusion that the instrument is used for surveying purpose.
8. Further, the learned Senior Counsel appearing for the petitioner would only contend that though the instrument is a surveying instrument it cannot be construed or called as a mechanical survey instrument as it is purely managed by electronic gadgets and at the time of passing of the Act the legislatures never thought about implementation of electronic gadgets and whatever it is stated in the Act would only denote the mechanically operated instruments and not to the electronically operated goods. In fact, at this juncture, it is pertinent to extract the relevant provisions which both the parties relied upon to substantiate their case.
Tamil Nadu General Sales Tax Act. First Schedule Part B 50.
Electronic systems, instruments, apparatus, appliances and other electronic goods (other than those specified elsewhere in the Schedule) but including electronic cash registering, indexing, card punching, franking, addressing machines and computers of analog and digital varieties, one record units, word processor and other electronic goods and parts and accessories of all such goods.
Tamil Nadu General Sales Tax Act First Schedule Part F 14.
Binoculars, monoculars, opera glasses, other optical telescope, astronomical instruments, microscopes, binocular microscopes, magnifying glasses, diffraction apparatus and mountings therefor including theodolite, survey instruments and optical lenses, parts and accessories thereof. (underlining is ours)
9. The learned Senior Counsel appearing for the petitioner would contend that on a reading of the two provisions, there is no question of electronic theodolite and electronic survey instruments in entry 14 Part F and therefore, he would only contend that the electronic survey instrument is totally different and distinguishable from an ordinary survey instrument that is mechanically operated survey instruments. He would further contend that the survey instrument will not fall under the category and the goods has to be classified only under the head of other electronic goods as it will come under the special category which excludes the normal, general category. He would further strenuously contend that if there is an ambiguity in respect of the classification of the goods and if the legislature has failed to clarify its meaning by use of appropriate language, then the benefit must only go to the tax payer and even if there is an instrument as agreed to the applicability of the particular section, it would necessarily be only in favour of the assessee and therefore, it can only be considered as other electronic items of goods which carries a lesser rate of tax and not as an electronic survey instrument which carries a higher tax bracket.
10. The learned Senior Counsel for the petitioner would contend that all the items contained in this entry related to mechanical instruments only and therefore, the electronic theodolites and other survey instruments would not fall under this classification. Hence, the assessment order itself is not legally sustainable and sought for the quashing of the same.
11. The learned Special Government Pleader would specifically contend that as per the declaration made by the petitioner himself in the Customs Department it is only a surveying instrument and also the fact that there was no dispute that it is used only for surveying purpose when especially a specific category has been mentioned in the Act, there cannot be a reference to a general category and therefore, the assessing officer was right in concluding that the machinery has to be levied only in accordance with the specific category i.e. the surveying instruments. He would also specifically point out that a particular commodity is taxable at a particular rate, at the particular entry and the same must be adhered to. He also relied upon the ruling reported in 34 STC 153 and 39 STC 194 for the propositions that separate entry excludes the general entry and the penalty was also rightly imposed in view of the inordinate delay as well as the wrong declaration in charging of the rate.
12. To decide the question involved, whether the tax has to be levied in respect of these items whether it is called as a surveying instrument or electronic survey instrument what is the rate of tax to be levied, we are specifically governed by the very Act itself. On a careful reading of the two portions of the First Schedule as claimed by both the parties would reveal one thing clear that the entry 50 would clearly state that it would apply to all electronic instruments, apparatus excepting as specified in the very section itself (other than those specified elsewhere in the Schedule) the words which has been shown in the bracket would clearly indicate that if any other item is mentioned elsewhere in the Schedule, it will not be covered under the First Schedule Part B 50, this was mainly relied upon by the Special Government Pleader and also brought to the notice of this Court that on a reading of Part F-14 of the First Schedule the specific words used there are including theodolite, surveying instruments, ... and accessories thereof. Therefore, when there are specific recitals for a particular material, namely, survey instrument and theodolite, it could definitely come within the purview of Part F 14 and not Part B 50 as Part B 50 clearly denotes that other than those specified elsewhere in the Schedule. In Part F-14, the word both theodolite and survey instrument having been specifically mentioned definitely Part B 50 cannot be attracted.
13. Contra, the learned Senior Counsel appearing for the petitioner would contend that the words survey instrument and theodolite when it was introduced in this Act there were no electronic devices were used only mechanically which was available then therefore, the framers would not have thought of including the electronic items as it was not available then. Therefore, the new introduction of electronic goods would include this electronic and electronically operated item like theodolite and survey instruments which is of new generic equipments would be attracted by entry B 50. But, on a careful reading, it would denote that when the instrument is mentioned it will be inclusive of whether it is mechanical or electrical or electronic one. There cannot be a distinction in the type of electronic appliances or the latest electronic devices for the very same instrument. In fact, the Assessing Authority as well as the Appellate Assistant Commissioner and thereafter the Tribunal have all clearly held that this is a survey instrument which is imported by the petitioner or a new generation instrument and it is used for a total survey system consist of powerful telescopic and laser theodolite which is even used for a night surveying. In fact, we had also the benefit of catalogue of the item manufactured by the Japan company which would also clearly indicate that this is utilised only for surveying purpose and it is also called surveying instrument.
14. Therefore, definitely it cannot be gainsaid by the petitioner that it falls under electronic goods and that cannot be equated to survey instrument operated mechanically. Earlier it was mechanically operated, now it is being made as electronic devices.
15. The learned Senior Counsel appearing for the petitioner would further contend that on a reading of First Schedule of T.N.G.S.T. Act, Part B entries 38, 39, 40, 41, 42, 50, 51 and 52 which all would specifically say in respect of electronic items and charging 3% as the tax whereas if we take Part D entry 41 which would denote non-electronic weighing machines, dipping measures, metre scales, the sales tax would be at 8% and if we take Part E entry 20 which will denote electrical appliances (domestic and commercial) including Coffee roasting appliances and so many things under the explanation it will say all the above goods notwithstanding that they contain electronic circuits, switchings or control device systems, shall be deemed to be electrical appliances (domestic and commercial) and which would be taxable at the rate of 12% and in the case of Part F entry 10, 11, 12 and 14 it denotes typewriters, teleprinters, tabulating, calculating machines, duplicating machines, binoculars, monoculars, wherein theodolite and survey instrument which mentioned in entry F - 14 these are all items will include at 16%. Therefore, his contention is wherever electronic items have come the rate have been specifically made at 3% and he was under the bona fide impression that this being an electronic goods automatically it is liable to be levied only at 3% and he cannot be expected to pay 16% as he would mainly contend that it can only be an electrical item. Therefore, the levy was not correct.
16. But, this argument cannot be accepted in view of the specific recital in the Part B entry 50 which would specifically indicate that other than those specified elsewhere in the Schedule also as stated supra that the specialised materials having been specifically stated under the rate of 16% merely because the devices is operated by electronic method it cannot be treated as a electronic goods.
17. In this connection, the learned Senior Counsel appearing for the petitioner relied upon the following propositions that in spite of availability of a specific entry to get a pep up to the modern technology and to promote consumer electronic industry the lower rate of tax was fixed as in the case reported in 121 STC 450, (SC) BPL Ltd., (2001) wherein it was held that washing machine though was specifically mentioned in item No.38 (iv) of the Schedule to the Act whereas entry 38 (v) relates to electronic items including automatic washing machines. Therefore, the electronic washing machine also come under entry 38(v) and the notification would apply to all electronic goods including automatic washing machines of the appellants. Basing on this ruling, the Senior Counsel appearing for the petitioner would contend that the survey instrument which is now electronic instrument though is separately shown under entry F 14 would come under entry B 50 and to the same effect the other ruling 131 STC 160 (All) Cannon India (P) Ltd; 11 VST 277 (All) Barco Electrical System, 14 VST 150 (Ker) K.M.Mohammed Habeebulla, the decision of the Hon'ble Supreme Court has followed in the above three cases.
18. The learned Senior Counsel appearing for the petitioner would further rely upon 176 IRT 435 (SC) for the interpretation of statute and intention in granting the exemptions wherein the Hon'ble Supreme Court has held that while giving a meaning to an item contained in the schedule of articles, the Court should normally give it a meaning intended by the framers of the Schedule by looking at the various articles mentioned in a particular group. All the items in one group should be considered in a generic sense. It appears that class III of the schedule in the instant case was intended to deal with the subjects of methylated, denatured and rectified spirit which was brought within the limits of the Nagar Mahapalika for use as articles for lighting, fuel, washing and lubricants at the low rate of Re.0.05 per litre while liquor brought within its limits for use as an article of intoxication was intended to be subjected to levy of octroi duty at the higher rate of Re.1 per litre.
19. Further, the learned Senior Counsel appearing for the petitioner would rely upon 88 ITR 192 (SC) for the proposition that if the language of taxing provision is ambiguous or capable of more meanings than one, then the Courts have to adopt the interpretation which favours the assessee. In fact, the Hon'ble Supreme Court has held that (on the other hand) if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well accepted rule of construction recognised by this Court in several of its decisions. He would also further contend that since the classification had accepted by the Department for long time the petitioner is of the opinion it was for department to show as to why the different interpretation should be resorted to. In this connection, the Hon'ble Supreme Court has held as in the earlier case, it is now well settled principle of law that when two views are possible, one which favours the assessee should be adopted. He would also rely upon Madras High Court decision reported in 43 STC 404 which has held merely because an article cannot be used without electricity, it may not be decisive. It is necessary that, apart from that fact, the article, by its very nature, answers the description of electrical goods.
20. The argument of the learned Senior Counsel on the basis of these rulings would only indicate that even though the item is mentioned in a separate clause under entry F 14 inasmuch as it is used by electronic methods and when specifically electronic items are given the benefit to this instrument is only to be construed as a electronic goods as under First Schedule Part B and not under Part F 14. His main contention was in all these cases the Courts have interpreted that in spite of the fact that there was a separate entry yet electronic goods when it is mentioned though not specifically would include the said item also. But, there is a distinction in the case. Here, as admitted by the petitioner himself, even before the Customs Authorities that he has brought this machinery only for the purpose of surveying and treated as surveying instrument. When specifically the theodolite as well as the survey instrument has been mentioned there whereas entry B 50 and a specific clause has been made excluding other items in the schedule thereon definitely there is a distinction. In all these cases, only if there is a difference that the benefit of doubt can be given to assessee but in this case there is no ambiguity, there is no difference of opinion as it has been specifically made as one that of a surveying instrument which is also admitted.
21. In the case of BPL Ltd., reported in 121 STC 450 it is worthwhile to mention that the relevant portion of the judgement in paragraph 4 itself it is clearly stated that prior to July 20, 1988, the rate of sales tax leviable on the sale of automatic washing machine was 10%. On July 20, 1988, by a notification issued in exercise of power contained in section 9 of the Andhra Pradesh General Sales Tax Act, 1957, the rate of tax payable on the sale of electronic goods, as defined in the said notification was reduced to 2 paise in a rupee with effect from July 1, 1988. This notification also exempted the sale of electronic goods from the levy of additional tax under section 5-A and surcharge on sales tax under section 6-B of the said Act. The term electronic goods was also defined in the notification as electronic goods means electronic systems, instruments, appliances, apparatus, equipment operating on electronic principles and all types of electronic components, parts and materials and includes (i) consumer electronics; (ii) electronic test and measuring instruments; (iii) medical electronic equipment; (iv) electronic analytical instruments; (v) electronic equipment/instrument for nuclear geoscientific and other special applications; (vi) electronic process control equipment; (vii) power electronic equipment; (viii) electronic industrial automation and control equipment; (ix) electronic data processing systems and electronic office equipment; (x) electronic broadcasting equipment; (xi) electronic communication equipment; and (xii) electronic aerospace and defence equipment. Basing on the said notification the appellants claimed that fully automatic washing machines were micro-computer-controlled washing machines that actually worked on the principle of auto selection of the various parameters. But, the Department did not accept the contention of the appellants and the Department was raising a demand for differential tax on the ground that the washing machine is given in a different schedule. The Andhra Pradesh High Court rejected the claim of the company accepted the version of the department on appeal the Hon'ble Supreme Court held taking into consideration the key word as per the notification are operating on electronic principles and that the Andhra Pradesh Government issued such a notification to give fillip to modern technology as a result of which consumer electronics or electronic appliances or equipment operating on electronic principles were to be charged lesser rate of sales tax. In other words, what the said notification requires is that an item can be regarded as electronic goods if all its functions which are required to be performed by that equipment or appliance are performed or controlled electronically by micro-processor. Further, the Hon'ble Supreme Court pointed out that on June 1, 1989, the Government of Andhra Pradesh has issued a memorandum drawing the attention of the Commercial Taxes Department to the notification dated 20th July 1988 bringing out various items of list coming under the consumer electronic goods and the definition of electronic goods were to be followed and washing machine even though specifically mentioned in clause 38 sub-clause (iv) of the Schedule to the Act but pursuant to the notification it would be construed as an electronic goods and finally held an electronic washing machine would come under 38(v) and the notification dated July 20, 1988 would apply to all electronic goods including automatic washing machines of the appellants. Therefore, the basis for the judgment is the subsequent notification which gave the concessional rate of tax for giving a pep up to the electronic industries. Whereas in this case the very act prohibits the same and very act excludes the same. Therefore, the ruling cited by the petitioner will not be applicable to the facts of this case. Part B of 50 clearly stipulates that other goods specified elsewhere in the schedule would be excluded. Therefore, there can be no comparison in between the concession given under the notification can be applied to the facts of the case when act clearly excludes the special item from the general entry.
22. The learned Special Government Pleader has brought the following rulings to the notice of this Court:
1.139 STC 504 (Ker) Southern Gas Ltd vs. 2.84 STC 571 (Guj) C.K.Gause Bandage Mfg. Co.
3.147 STC 421 (SC) Carrier Aircon Ltd.
4.147 STC 329 (Ker) Stovekraft Pvt. Ltd.
5.47 STC 359 (SC) Indo International Indusries.
6.7 STC 557 (Bom) Roopkala Industries 7.45 STC 245 (Del) Sialkot Trading Company 8.121 STC 294 (SC) Shri Naresh Chandra Ghose 9.80 STC 167 (Mad) Bimetal Bearings Ltd.
10.55 STC 354 (Mad) Indian Eylets Industries 11.53 STC 429 (Mad) Kannika Sycle Stores 12.87 STC 167 (Mad) Anikal Corporation
23. The major contention raised by the Special Government Pleader as per the three Hon'ble Supreme Court judgments reported in 147 STC 421, 47 STC 359 and 121 STC 294 and the three Madras High Court judgments reported in 80 STC 167, 55 STC 354 and 53 STC 429 were to the effect that there are number of factors which have to be taken into consideration for determining the classification of a product. For the purpose of classification the relevant factors, inter alia, are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to, the end use to which the product is put to, cannot determine the classification of that product. The product should be given the meaning of the terms or expressions used, but to their popular meaning, that is to say, the meaning attached to them by those dealing in them or in other words the meaning of the term in common parlance or commercial parlance has to be adopted. In a case where an item falls under two entries in the schedule in order to decide the taxable entry the question is as to which of the two is the special entry, for the special entry will exclude the general entry and if a description is given in respect of the product it is impermissible to ignore the description. Even as per the Madras High Court decision, the theodolite has been construed as an instrument used for surveying purpose and therefore, it will not come under the classification of electronic goods.
24. On a plain reading of the two provisions i.e. B - 50 and F - 14 of the First Schedule, there is an exclusion clause, namely, other than those specified elsewhere in the Schedule. Admittedly, in this case, in the other schedule F - 14 the word used is including theodolite, survey instruments and optical lenses, parts and accessories thereof. Therefore, two things are clear one the word theodolite as well as survey instruments have been used specifically in F 14 whereas in B - 50, the word used is electronic goods but it also specifically stated that other than those specified elsewhere in the Schedule. Therefore, the literal meaning of the common understanding in the interpretation of a statute could only mean that wherever the product is specifically mentioned elsewhere then such product will be excluded as found in B - 50. But, in this case, though reliance has been made specifically that the theodolite is an instrument, namely, survey instrument, fully computerised and used on electronic devices. The new concession given in respect of electronic goods has to be taken note of and such a concession should be given in this case also by placing reliance upon the Hon'ble Supreme Court ruling in BPL Ltd., case is legally not sustainable. We have already held that BPL Ltd., case will not be applicable to the facts of this case. Similarly, the ruling cited by the Senior Counsel appearing for the petitioner reported in 42 STC 433 can be easily distinguishable. The finding is extracted below:
"The reason is that, as pointed out by Story, J., in 200 Chests of Tea (1824) 9 Wheaton (U.S.) 430, the legislature does "not suppose our merchants to be naturalists, or geologists, or botanists". But here the word "textiles" is not sought by the assessee to be given a scientific or technical meaning in preference to its popular meaning. It has only one meaning, namely, a woven fabric and that is the meaning which it bears in ordinary parlance. It is true that our minds are conditioned by old and antiquated notions of what are textiles and, therefore, it may sound a little strange to regard "dryer felts" as "textiles". But it must be remembered that the concept of "textiles" is not a static concept. It has, having regard to newly developing materials, methods, techniques and processes, a continually expanding content and new kinds of fabric may be invented which may legitimately, without doing any violence to the language, be regarded as "textiles". Take for example rayon and nylon fabrics which have now become very popular for making wearing apparel. When they first came to be made, they must have been intruders in the field of "textiles" because only cotton, silk and woollen fabrics were till then recognised as "textiles". But today no one can dispute that rayon and nylon fabrics are textiles and can properly be described as such. We may take another example which is nearer to the case before us. It is common knowledge that certain kinds of hats are made out of felt and though felt is not ordinarily used for making wearing apparel, can it be suggested that felt is not a "textiles"? The character of a fabric or material as textile does not depend upon the use to which it may be put. The uses of textiles in a fast developing economy are manifold and it is quite common now to find "textiles" being used even for industrial purposes. If we look at the Customs Tariff Act, 1975, we find in Chapter 59 occurring in section XI of the First Schedule that there is a reference to "textile fabrics" and textile articles, "of a kind commonly used in machinery or plant" and clause (4) of that chapter provides that this expression shall be taken to apply inter alia to "woven textile felts..... of a kind commonly used in paper-making or other machinery....." This reference in a statute which is intended to apply to imports made by the trading community clearly shows that "dryer felts" which are "woven textile felts..... of a kind commonly used in paper-making machinery" are regarded in common parlance, according to the sense of ordinary traders and merchants, textile fabrics. We have, therefore, no doubt that "dryer felts" are "textiles" within the meaning of that expression in items 30 of Schedule B."
25. Here, the Hon'ble Supreme Court has come to the conclusion that the use to which it may be put is also immaterial and does not bear in its character as a textile. A textile may have diverse uses and it is not the use which determines its character as textile. Therefore, they felt that the "dryer felts" which are used only as absorbents of moisture in the process of manufacture in a paper manufacturing unit. That cannot militate against "dryer felts" falling within the category of "textiles", if otherwise they satisfy the description of "textiles". Whereas, in this case, the instrument which is used is clear, correct and identified it is only as a survey instrument be that it is mechanically operated or electronically operated and as stated supra the word theodolite used also as quoted by the Madras High Court reported in (1998) 109 STC 593 (Lawrence and Mayo India (Private) Ltd., V. State of Tamil Nadu). In this case it is relevant to extract the meaning of theodolite as given in The New Lexicon Webster's Dictionary of the English Language, 1991 Edition, at pate 1025 as below:
"The-odo-lite (Oi-od-lait) n. an instrument used by surveyors to measure vertical and horizontan angles, consisting of a small telescope moving along a gradual scale. (origin unknown) Similarly the Bureau of Indian Standards issued specifications which is extracted in the judgment of the Madras High Court is as follows:
"Foreword-This Indian Standard (First Revision) was adopted by the Bureau of Indian Standards, after the draft finalised by the Optical and Mathematical Instruments Sectional Committee had been approved by the Light Mechanical Engineering Division Counsil.
Theodolite is an instrument for precise measurement of horizontal and vertical angles. The vernier theodolite is provided with graduated horizontal and vertical circles and two small vernier scales. The vernier scales are movable and remain in sliding contact with the graduated circles. The vernier theodolite is not so precise as other advanced designs, such as optical theodolite but is still used largely due to lower cost and simplicity of design. Vernier theodolite may be used for all types of surveys required for small and large scale mapping."
26. Therefore, it is a clear case that there is no question of any interpretation of the use of the instrument merely because of the use of the instrument is given by electronic purpose it will change the character or it will change the meaning especially as electronic goods and seek for a lesser rate of tax. First Schedule, Part F - 14 categorically has included both theodolite and survey instrument and as discussed earlier also that from the reading of the catalogue we are able to understand that the entire function for which it is used, the only thing that it is added to computer adaptability is only for the purpose of field survey. Therefore, the nomenclature used as well as the user purposes for which it is identified by either party is only as that of survey instrument. Therefore, there is no necessity at all for any other interpretation in fact, the petitioner has also imported the same declaring this to be a survey instrument and sold it as a survey instrument. Therefore, there cannot be any meaning attributed to the word electronic goods in this category. Therefore, the Hon'ble Supreme Court ruling relied upon by the petitioner cannot be applied for the facts of the present case as there is no distinction at all insofar as the product or as to the purpose for which it is used.
27. Whereas the learned Special Government Pleader relied upon a decision reported in 47 STC 359 (SC) (Indo International Industries Vs. Commissioner of Sales Tax, Uttar Pradesh) which also consisting Three Judges Bench of the Hon'ble Supreme Court has categorically held that it is well-settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, resort should be had not to the scientific and technical meaning of the terms or expressions used, but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted. In that ruling, it is further held that the clinical syringes manufactured and sold by the assessee during the year 1973-74 could not be considered as "glassware" falling within entry 39 of the First Schedule to the U.P.Sales Tax Act, 1948, would fall under "hospital equipment". Therefore, here also the user of the word is only for survey and theodolite being a survey instrument definitely it will come under the specified category and it exclude the general category.
28. The Special Government Pleader also relied upon the judgement of the Hon'ble Supreme Court reported in 121 STC 294 (State of Assam and Others V. Shri Naresh Chandra Ghose (Decd. by L.Rs.) wherein it has held that the Legislature has a wide discretion in selecting persons or objects it wants to tax. A statute cannot be challenged on the ground that it levies tax on one class of articles and not on others. He would further contend that merely because the exemptions were granted for electronic goods in some other industry that by itself could not give any right for the petitioner to seek that the goods which is now sold by him should be given this concession. In fact, in that very ruling the Hon'ble Supreme Court has categorically held that in respect of the arishtams and asavas are medical preparations in the earlier case of Arya Vaidya Pharmacy [1989] 2 SCC 285, had declared that they are not taxable as even though they contain alcohol yet it is a medical preparations and exempted from tax but whereas in Tamil Nadu the exemption was granted only if the alcohol content is less than 12%, if it is more than 12% then tax is leviable. Such distinction even in respect of preparations was held to be correct and legal and others cannot question on the basis of the same. Here also the only plea made by the learned Senior Counsel appearing for the petitioner is that in the case of Andhra Pradesh where electronic goods were given an exemption the same should be applied to Tamil Nadu also. As held earlier in Andhra Pradesh a special notification is passed and here the act excludes hence not applicable.
29. The decisions of the Madras High Court reported in 80 STC 167, 55 STC 354, 53 STC 429 and 87 STC 167 wherein this Court has categorically held that entries in the schedule specifically excludes the general entry and in the decision reported in (1991) 80 STC 167 has held that the 'entry' to be interpreted here is in a taxing statute; full effect should be given to all the words used therein. If a particular article would fall within a description, by the force of words used, it is impermissible to ignore that description, and denote the article under another entry, by a process of reasoning. The other judgments are also to the same effect that when there are specific entries it will exclude the general entry.
30. Whereas the judgment relied upon by the learned Senior Counsel appearing for the petitioner reported in (1988) 70 STC 97 (Nagar Mahapalika, Bareilly V. State of U.P. and others) wherein the Hon'ble Supreme Court has categorically held while giving a meaning to an item contained in the Schedule of articles, the court should normally give it a meaning intended by the framers of the Schedule, by looking at the various articles mentioned in a particular group. All the items in a group should be considered in a generic sense, which was mainly relied upon by the learned Senior Counsel appearing for the petitioner to substantiate his case. This ruling will not apply to the facts of the case as held earlier the meaning is very clear and there is no ambiguity.
31. The other decision relied upon by the learned Senior Counsel appearing for the petitioner reported in 2008 14 VST 259 (Mauri Yeast India Pvt. Ltd., V. State of U.P. and another) wherein it is held that it is now a well-settled principle of law that when two views are possible, one which favours the assessee should be adopted. In that case, the main crux was when there were two interpretations possible the classification adverted to by the assessee had been accepted by the Revenue for more than 20 years. Therefore, the Hon'ble Supreme Court has held a different construction to an entry cannot be resorted to only because the rate of tax has been lowered. As the said classification had been accepted by the Revenue for a long time, the onus would be on it to show as to why a different interpretation thereof should be resorted to particularly when no change in the statutory provision has taken place. Therefore, in that particular case there was no question of distinction of products. It was not only the distinction in respect of classification which admittedly was accepted by the Department for more than 20 years and therefore, the assessment rate benefit which he could get accrued for so long number of years would not be whittled down merely because the Department can get a better rate. But, here the question is totally different. The very same product merely because of electronic use can it come under different head, namely, electronic goods is a question and therefore, the ruling relied upon by the learned Senior Counsel appearing for the petitioner cannot be applied to the facts of the case.
32. Similarly the ruling cited by the learned Senior Counsel appearing for the petitioner reported in 177 ITR 418 (Broach Distt. Co-operative Cotton Sales, Ginning and Pressing Society Ltd. V. Commissioner of Income Tax, Ahmedabad) it was held that object of 81(i) was to encourage and promote the growth of Co-operative societies and consequently liberal construction had to be given is not applicable to the facts of the case at all as there is no need for any interpretation when the Schedule is clear.
33. In this connection, we are fortified by the decision of the Madras High Court judgment reported in 80 STC 167 (Bimetal Bearings Ltd. V. State of Tamil Nadu) wherein it was held that the entry to be interpreted here is in a taxing statute; full effect should be given to all the words used therein. If a particular article would fall within a description, by the force of words used, it is impermissible to ignore that description, and denote the article under another entry, by a process of reasoning. Therefore, in the present case, when it is very clear that the product is survey instrument the full interpretation should be given for the word as found in the Schedule and therefore, there is no need for any other definition or interpretation. While taking into consideration the various rulings of the Hon'ble Supreme Court as well as this Court definitely we could safely conclude that for the product in question there cannot be any second interpretation and it would only fall under Part F 14 of the First Schedule since it comes under special category would exclude the general category. Therefore, the Tribunal has given a cogent and correct finding including taking into consideration of the assessment record and the catalogues technical details had given a clear finding of fact that the instruments are intrinsically survey instruments only and also given a finding that there is no ambiguity in the entries and the framers of law have classified these items in one group irrespective of the fact whether these items are operated by electronic or mechanical mode. The Tribunal has rightly held that a mere addition of memory card or software will not in any way alter the character of the goods which is intrinsically survey instruments only and therefore, the commodity would clearly fall under Part F 14 and assessed to tax at 16% and not at 3% as claimed by the petitioner under the head of electronic goods. Therefore, the findings given by the Tribunal is clear and correct. Therefore, the two cases in respect of the assement years 1993-1994 and 1994-1995 fails and the question of law is answered against the assessee.
34. The next argument which was mainly placed by the learned Senior Counsel appearing for the petitioner that inasmuch as there was two interpretation possible the petitioner having followed one interpretation it cannot be considered to be violation of any law and therefore, penalty imposed under Section 12 (3)(b) should not be levied at least the penalty should be excluded. He relied upon a decision of the Hon'ble Supreme Court reported in 88 ITR 192 (Commissioner of Income Tax, West Bengal-I Vs. Vegetable Products Ltd.) wherein it has held that if two reasonable construction of taxing provision are possible, that construction which favours the assessee must be adopted and if such a construction is adopted then, the mere non-payment would not be entitled to a penalty and penalty should not be levied under Section 12(3)(b). As discussed earlier, since we have categorically come to the conclusion and given a finding that there can be no two interpretations in respect of the classification of the goods. The question of another interpretation does not arise at all. As rightly pointed out by the Tribunal inasmuch as there is a total variation in paying the tax levy at 3% to 16% the penalty is warranted and penalty is leviable and finding of the Tribunal is in order and does not call for any interference. Hence this question is also answered against the assessee.
35. In the result, the two petitions for the assessment years 1993-94 and 1994-95 and the consequent challenge to the penalty order under W.P.No.18770 of 2000 are all dismissed and the common order passed by the Tribunal dated 03.12.1999 is upheld as it does not warrant any interference. No costs.
srm/kk To
1.The Deputy Commissioner of Commercial Taxes, PAPJM Buildings, Greams Road, Chennai - 600 006.
2.The Tamil Nadu Sales Tax Appellate Tribunal (Addl. Bench), Chennai, Rep. by the Secretary, City Civil Court Buildings, High Court Compound, Chennai - 600 104.
3.The Commercial Tax Officer, Kilpauk Assessment Circle, Chennai