1985 (11) TMI 222 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term "pigment" for taxation purposes under the Rajasthan Sales Tax Act, 1954.

Analysis:
The case involved a dealer-assessee who dealt in "neel" (ultramarine blue) and chemicals and was registered under the Rajasthan Sales Tax Act, 1954. The assessing authority initially taxed the sale of "neel" at 12%, considering it a pigment under item No. 18 of a specific notification. The dealer-assessee contended that "neel" was not a pigment and should be taxed at the general rate of 7%. The Deputy Commissioner and the Board initially upheld the higher tax rate, but the dealer's revisions were allowed by the Board, leading to a reference to the High Court to determine if "neel" fell under the category of pigment for taxation purposes.

The High Court analyzed the meaning of the term "pigment" in the context of the notification. Referring to previous court decisions, the court emphasized that the interpretation of taxing statutes should consider how the terms are understood in common parlance by those dealing with the goods. The court highlighted that "pigment" typically refers to substances used for coloring, and "neel" (ultramarine blue) is commonly known as a whitening agent for laundry purposes, not a coloring substance. The court also examined a subsequent notification that explicitly mentioned "ultramarine blue" as taxable at 12%, which clarified the status of "neel" for taxation.

Based on the analysis, the High Court concluded that "neel" (ultramarine blue) did not fall under the category of "pigment" as per the notification in question. Therefore, the court upheld the lower tax rate of 7% for the sale of "neel" by the dealer-assessee. The court affirmed the decision of the Board and deemed the references as applications for revision under the amended Act, disposing of them accordingly. The court also ordered each party to bear their own costs, and the reference was answered in favor of the dealer-assessee.