1991 (5) TMI 245 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether "jewellery" and "ornaments" are the same commercial commodity.
2. Whether the sale of jewellery should be taxed at a reduced rate of 2% applicable to gold ornaments.

Detailed Analysis:

Issue 1: Whether "jewellery" and "ornaments" are the same commercial commodity.

The primary controversy revolves around the interpretation of the term "ornaments" as per Notification No. F. 4(87) 44-Fin. (E)(ii) dated June 30, 1966, under the Bengal Finance (Sales Tax) Act, 1941. The assessing authority concluded that "ornaments" referred exclusively to those made of gold, and any studded with stones, precious or otherwise, should be classified as "jewellery" and not "ornaments." This interpretation was based on a prior decision for the assessment year 1968-69, where the assessee's sales were taxed at 5%.

The court examined various dictionary definitions and judicial precedents to discern the common parlance meaning of "ornaments" and "jewellery." Dictionaries like the Oxford English Dictionary and New Webster's Dictionary define "ornament" as an object meant to add beauty, while "jewellery" includes articles made of precious materials for personal adornment.

Judicial precedents from the United States, United Kingdom, and Indian courts were also reviewed. For instance, in Com v. Stephens, Shaw, C.J., opined that "jewellery" is a generic term encompassing all articles of personal adornment. Similarly, in the UK case In re Whitby, Lord Greene M.R. held that "jewellery" includes gems sold by jewellers, not just made-up articles of adornment.

Indian courts, including the Orissa High Court in State of Orissa v. Jamula Srirangam and the Allahabad High Court in Ganeshi Lal and Sons v. Commissioner of Sales Tax, have consistently interpreted "jewellery" to include gold ornaments, even when studded with precious stones. The Gujarat High Court in Commissioner of Wealth-tax v. Arundhati Balkrishna and the Punjab and Haryana High Court in Commissioner of Wealth-tax, Patiala v. Rajeshwar Parshad also affirmed this view.

The Delhi High Court, in Commissioner of Wealth-tax v. Smt. Savitri Devi, reiterated that "jewellery" includes gold ornaments, emphasizing that precious stones are not necessary for an item to be considered jewellery. The court concluded that the term "jewellery" as understood in common parlance includes gold ornaments.

Issue 2: Whether the sale of jewellery should be taxed at a reduced rate of 2% applicable to gold ornaments.

The assessee challenged the assessing authority's decision to tax studded gold ornaments at 5% instead of the 2% rate applicable to gold ornaments. The court examined whether gold ornaments could be classified as "jewellery" only when studded with precious stones.

The court referred to various judicial decisions and dictionary definitions to establish that gold ornaments, whether studded or not, fall under the category of "jewellery." The Allahabad High Court in Ganeshi Lal and Sons v. Commissioner of Sales Tax held that the term "ornaments" is comprehensive and includes all kinds of jewellery, whether studded with precious stones or not.

The court concluded that the understanding of "ornaments" and "jewellery" in common parlance and judicial interpretation supports the view that gold ornaments, even when studded, should be taxed at the rate applicable to gold ornaments. Therefore, the sale of jewellery should be subjected to the reduced tax rate of 2%.

Conclusion:
The court affirmed the decision of the Appellate Tribunal, holding that "jewellery" and "ornaments" are the same commercial commodity and that the sale of jewellery should be taxed at the reduced rate of 2% applicable to gold ornaments. The reference was answered in the affirmative, with no order as to costs.