1969 (2) TMI 169 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sodium silicate is included in "chemicals of all kinds" as per item 7 of Notification No. ST-905/X dated 31st March, 1956.

Issue-wise Detailed Analysis:

1. Whether sodium silicate is included in "chemicals of all kinds" as per item 7 of Notification No. ST-905/X dated 31st March, 1956:

Context and Notification:
Section 3 of the U.P. Sales Tax Act imposes a tax on the sale of goods. Section 3-A(1) empowers the State Government to notify the turnover in respect of any goods or class of goods to be liable to tax at a single point in the series of sales by successive dealers. Section 3-A(2) allows the Government to fix the tax rate. A notification issued on 31st March 1956, under Section 3-A, included "chemicals of all kinds" at item 7, specifying the point of tax for chemicals manufactured in Uttar Pradesh and those imported from outside.

Case Background:
The opposite party, a manufacturer and dealer in sodium silicate and washing soap, sold sodium silicate for Rs. 98,028.00 in the assessment year 1958-59. The Sales Tax Officer classified sodium silicate as a chemical and taxed it accordingly. This decision was upheld on appeal but reversed by the Judge (Revisions), who ruled that sodium silicate was not a chemical.

Arguments and Judicial Reasoning:
The primary question referred to the court was whether sodium silicate, as used in soap manufacture, falls under "chemicals of all kinds" in the notification.

A Division Bench had previously affirmed that sodium silicate is a chemical in Commissioner of Sales Tax v. Banaras Chemicals [1967] 20 S.T.C. 246. Despite this, the opposite party's counsel argued that sodium silicate is not a chemical, emphasizing its indefinite chemical formula and lack of use in chemical processes or industries.

Interpretation of "Chemical":
The court emphasized that the term "chemical" should be interpreted in its commercial sense rather than a strict scientific sense. The purpose of sales tax law is revenue collection, classifying goods by trade and commerce usage. Scientific definitions are often abstract and not aligned with common understanding. The court cited several precedents, including Commissioner of Sales Tax, Madhya Pradesh v. M/s. Jaswant Singh Charan Singh [1967] 19 S.T.C. 469, which supported interpreting terms in statutes like Sales Tax Acts by their popular or commercial meaning.

Commercial Understanding of Sodium Silicate:
Sodium silicate is listed under various chemical categories in international catalogues and dictionaries, indicating its recognition as a chemical by dealers globally. The court found that sodium silicate, produced by fusing sodium carbonate and silicate, fits the commercial definition of a chemical.

Errors in Judge (Revisions) Reasoning:
The Judge (Revisions) erred by limiting the definition of a chemical to its use in chemical processes and industries. The court clarified that the use of a substance in a chemical process is not the sole criterion for it being a chemical. Sodium silicate's use in the soap industry as a detergent was also misinterpreted.

Reframing the Question:
The court reframed the question to: "Whether sodium silicate is included in 'chemicals of all kinds' in item No. 7 of Notification No. ST-905/X dated 31st March, 1956?" The answer was affirmative.

Separate Judgment Analysis:

Pathak, J.:
Pathak, J. reiterated that the U.P. Sales Tax Act is a fiscal statute, and terms in the notification should be understood in their commercial sense. The entry "chemicals of all kinds" should be construed based on how a dealer and purchaser would understand it. Sodium silicate's various uses and chemical properties make it a chemical in the commercial sense, regardless of its specific use in soap manufacture.

Gulati, J.:
Gulati, J. agreed with the final answer but added that the question should not be limited to sodium silicate's use in soap manufacture. The U.P. Sales Tax Act targets the business community, and terms should be interpreted as understood in commerce. Sodium silicate, produced by a chemical process, is a chemical regardless of its specific use in soap.

Final Judgment:
The court unanimously answered the reframed question in the affirmative, confirming that sodium silicate is included in "chemicals of all kinds" as per item 7 of Notification No. ST-905/X dated 31st March, 1956. The Commissioner of Sales Tax was awarded costs assessed at Rs. 100.