1991 (12) TMI 261 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether lignite is considered coal under entry No. 1, Schedule II, Part A of the Gujarat Sales Tax Act, 1969.
2. Whether lignite is declared goods of special importance under section 14 of the Central Sales Tax Act, 1956.
3. Whether the restrictions imposed under section 15 of the Central Sales Tax Act, 1956, apply to lignite.

Issue-wise Detailed Analysis:

1. Whether lignite is considered coal under entry No. 1, Schedule II, Part A of the Gujarat Sales Tax Act, 1969:

The petitioners argued that lignite should be classified as coal, thus attracting a tax rate of 4% as per entry No. 1, Schedule II, Part A of the Gujarat Sales Tax Act, 1969. They relied on a 1976 determination order by the Deputy Commissioner of Sales Tax, which classified lignite as coal, thereby subjecting it to a 4% tax rate. However, the court noted that this determination order was rendered before the specific entry for lignite was introduced in the Act in 1981. The court emphasized that the determination order cannot prevent legislative amendments and that the classification of commodities can be revised by the authorities if the earlier decision was not in accordance with the law.

2. Whether lignite is declared goods of special importance under section 14 of the Central Sales Tax Act, 1956:

The petitioners contended that lignite should be treated as coal under section 14 of the Central Sales Tax Act, 1956, thereby making it goods of special importance. However, the court found that lignite and coal are distinct commodities. The court referred to the petitioners' own admissions in their applications, where they described lignite as a substitute or alternative to coal, indicating that lignite is not the same as coal. The court also applied the common parlance test, which considers the popular meaning of terms as understood by those dealing in them, rather than their scientific or technical meanings. Based on this test, the court concluded that lignite is not coal.

3. Whether the restrictions imposed under section 15 of the Central Sales Tax Act, 1956, apply to lignite:

Since the court determined that lignite is not coal, the restrictions under section 15 of the Central Sales Tax Act, 1956, which limit the tax rate on coal to 4%, do not apply to lignite. The court also referenced various mining legislations, such as the Mines and Minerals (Regulation and Development) Act, 1957, and the Coal Mines Act, which treat lignite and coal as separate commodities. This further supported the court's conclusion that lignite is not coal and thus not subject to the tax restrictions applicable to coal.

Conclusion:

The court concluded that lignite is a distinct commodity from coal and does not fall under the same tax entry as coal. Consequently, the tax rate on lignite is not limited to 4% as per the provisions applicable to coal under the Central Sales Tax Act, 1956. The petitions were dismissed, and the rule was discharged with no order as to costs.