1991 (4) TMI 388 - HC - VAT and Sales Tax

Issues Involved:
1. Classification of "ultramarine blue" under the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of tax rates under item 110 or item 138 of the First Schedule.
3. Legality of multi-point levy under section 3(1) of the Act.
4. Interpretation of "ultramarine blue" as a "pigment" or a "chemical."

Detailed Analysis:

1. Classification of "Ultramarine Blue":
The primary issue was whether "ultramarine blue" falls under item 110 or item 138 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The Court examined the nature and use of "ultramarine blue" to determine its appropriate classification.

2. Applicability of Tax Rates:
For the assessment year 1978-79, the Joint Commercial Tax Officer classified "ultramarine blue" under item 110, treating it as "colour" and subjected it to an 8% tax rate. The appellate authority agreed but considered it a "pigment." The Tribunal, however, classified it under item 138 as a "chemical," leading to the State's revision petition. For subsequent years, similar disputes arose, with the Tribunal sometimes treating it as subject to multi-point levy under section 3(1) of the Act.

3. Legality of Multi-Point Levy:
In cases like T.C. No. 248 of 1989 and T.C. Nos. 249 to 250 of 1989, the Tribunal held that "ultramarine blue" should be taxed at a multi-point rate of 5% under section 3(1) of the Act, rather than under item 110 or 138. This decision was contested by the State, leading to revisions.

4. Interpretation as "Pigment" or "Chemical":
The Court analyzed whether "ultramarine blue" could be considered a "pigment" or a "chemical." It reviewed various case laws and principles, including the ejusdem generis rule and commercial parlance, to determine the appropriate classification.

Key Judgments and Principles:

- Commercial Parlance: The Court emphasized that in taxing statutes, terms should be understood in their popular or commercial sense rather than their scientific or technical meanings. This principle was supported by cases like Commissioner of Sales Tax v. Jaswant Singh Charan Singh and Avadh Sugar Mills Ltd. v. Sales Tax Officer.

- Previous Case Law: The Court considered decisions from other High Courts and the Supreme Court, such as Ganu Bhai v. Commissioner of Sales Tax and Assistant Commercial Taxes Officer v. Rajasthan Chemical Corporation, which dealt with similar classification issues.

- Circular Orders and Administrative Interpretation: The Court noted that the administrative interpretation by the Commissioner of Commercial Taxes, as reflected in circular orders, provided valuable guidance but was not binding on judicial authorities.

Court's Conclusion:

The Court concluded that "ultramarine blue" falls under item 110 of the First Schedule to the Act, classifying it as a "pigment." The Court reasoned that "ultramarine blue" does not have the attributes of a "dye" or a "chemical" but is commonly understood as a pigment used for brightening or whitening textiles and clothes. Therefore, it should be taxed at the rate specified under item 110, which is 10% at the point of first sale in the State.

Outcome:

- T.C. Nos. 1108 of 1981, 1387 of 1984, 248 to 250 of 1989: The revisions by the State were allowed, and "ultramarine blue" was held liable to sales tax under item 110.
- W.P. Nos. 6689 and 6690 of 1984: No further orders were required as the State would implement the Act in light of the Court's declaration.
- W.P. Nos. 3116, 3250, and 3251 of 1986: The writ petitions were dismissed, with no order as to costs.

This judgment clarified the classification and tax treatment of "ultramarine blue" under the Tamil Nadu General Sales Tax Act, 1959, resolving the disputes regarding its appropriate tax rate and classification.

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