1974 (2) TMI 60 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term "cement" for taxation purposes under the U.P. Sales Tax Act for the assessment years 1964-65 and 1965-66.

Detailed Analysis:
The judgment pertains to a reference under section 11(3) of the U.P. Sales Tax Act concerning the assessment of turnover for different varieties of cement. The assessee, a dealer in various types of cement, argued that white cement and refractory cement should be assessed differently from ordinary cement due to their unique properties. The appellate authority accepted this contention, leading to the current dispute. The key question posed for opinion was whether white cement and refractory cement should be taxed as ordinary cement at 7% under a specific notification. The notification in question imposed a tax rate of 7 paise per rupee on cement not covered by a particular entry, irrespective of its type, at the point of sale by the manufacturer or importer.

The court analyzed the nature of cement, emphasizing that the term "cement" should be understood in its common parlance sense. It noted that white cement, while a special variety with a whitish color, is fundamentally similar to ordinary grey cement in terms of usage and manufacturing process. Drawing parallels from a Supreme Court case regarding the interpretation of terms like "coal," the court highlighted that for tax statutes like the Sales Tax Act, terms should be construed based on their popular or commercial meaning rather than technical definitions. Applying this principle, the court concluded that in common parlance and commercial sense, the term "cement" encompasses all varieties unless explicitly distinguished by the Legislature.

Furthermore, the court addressed the subsequent inclusion of "white cement" under the entry for cement through an amendment, clarifying that this amendment did not indicate exclusion previously. It suggested that the clarification may have been prompted by conflicting views held by tax authorities. Ultimately, the court ruled in favor of the department, affirming that white cement and refractory cement should be taxed as ordinary cement at the standard rate of 7%, aligning with the common understanding of the term "cement."

In conclusion, the judgment underscores the importance of interpreting terms in tax statutes based on their ordinary meaning and commercial usage. It establishes that unless specifically differentiated by the Legislature, a broad term like "cement" encompasses all varieties, including white and refractory cement. The decision provides clarity on the taxation treatment of different cement types and upholds consistency in tax assessments across similar commodities.