1967 (8) TMI 106 - HC - VAT and Sales Tax

Summary

Issues:
Scope of entry 47 in Schedule I of the Madras General Sales Tax Act, 1959 - Inclusion of furnace oil, taxability of sales of scrap, chargeability of sales of publicity materials.

Scope of Entry 47 - Furnace Oil Inclusion:
The case questioned whether furnace oil falls under entry 47 of the Madras General Sales Tax Act, which was amended in 1964 to include "all kinds of mineral oils." The revenue argued that as a mineral oil, furnace oil should be taxed under entry 47. However, the court interpreted the amendment's purpose based on the statement of objects and reasons, concluding that the entry was intended to cover only mineral oils that are lubricants. The court found that furnace oil, being a non-lubricant, did not fall within the scope of entry 47.

Application of Ejusdem Generis Rule:
The court briefly discussed the ejusdem generis rule, stating that where specific words are followed by general expressions, the latter should be interpreted in conjunction with the former. The court applied this principle to the interpretation of entry 47, further supporting the conclusion that furnace oil was not included in the entry.

Chargeability of Sales of Publicity Materials:
The court analyzed the chargeability of sales of publicity materials by the assessee. It was found that the distribution of these materials to distributors was not done with the intent of engaging in trade or commerce of publicity materials. The court held that the turnover relating to sales of publicity materials was not chargeable to tax as the activity was solely for the purpose of advertisement and did not constitute business as a dealer.

Taxability of Sales of Scrap and Penalty Imposition:
The court ruled that the sales of scrap were not liable to tax based on previous judgments. Additionally, canteen sales were also deemed non-taxable. The penalty imposed on the assessee for the sales of publicity materials was deemed illegal as the turnover was disclosed in the accounts, and there was no basis for suggesting incomplete or inaccurate reporting. The court held that the penalty was unsupportable under Section 12(3) of the Act.

In conclusion, the court allowed the tax cases, ruling in favor of the assessee, and deemed the penalty of Rs. 1,000 as illegal. The judgment highlighted the limited interpretation of entry 47, the application of the ejusdem generis rule, and the non-chargeability of certain sales under the Madras General Sales Tax Act.