1995 (1) TMI 334 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "tol thinner" and "auto thinner" under the Bombay Sales Tax Act, 1959.
2. Applicability of Entry 39(d) of Schedule C versus Entry 22 of Schedule E.
3. Interpretation of the term "vehicles" in Entry 39(d).
4. Applicability of the "user test" in determining the classification of goods.
5. Application of the principles of ejusdem generis and noscitur a sociis.

Detailed Analysis:

1. Classification of "tol thinner" and "auto thinner" under the Bombay Sales Tax Act, 1959:
The primary issue was whether "tol thinner" and "auto thinner" were covered under Entry 39(d) of Schedule C or Entry 22 of Schedule E of the Bombay Sales Tax Act, 1959. The assessee claimed these items as chemicals eligible for concessional tax rates under Entry 39(i) of the notification issued under section 41 of the Act. However, the Sales Tax Officer classified them under Entry 39(d) of Schedule C, subjecting them to a higher tax rate.

2. Applicability of Entry 39(d) of Schedule C versus Entry 22 of Schedule E:
Entry 39(d) of Schedule C covers "all kinds of vehicles diluents and thinners," which are subject to a 12% tax rate. Entry 22 of Schedule E is a residuary entry covering all goods not specified in other schedules, taxed at 5%. The Tribunal upheld the Sales Tax Officer's classification under Entry 39(d), leading to the reference to the High Court.

3. Interpretation of the term "vehicles" in Entry 39(d):
The court examined the term "vehicles" in the context of Entry 39(d). The Revenue's counsel suggested it meant "medium," but the court found this interpretation irrelevant. The court referred to chemical dictionaries, concluding that "vehicles" in this context referred to the liquid portion of paint, comprising drying oil or resin, solvent, and thinner. Thus, "vehicles diluents and thinners" pertained to substances used in the paint industry to reduce viscosity.

4. Applicability of the "user test" in determining the classification of goods:
The court applied the "user test," considering the general or predominant use of the goods. "Tol thinners" and "auto thinners" were primarily used for dissolving rubber in the manufacture of leather cloth, not in the paint industry. Therefore, they did not fit the description of "vehicles diluents and thinners" used to reduce viscosity in paints and lacquers.

5. Application of the principles of ejusdem generis and noscitur a sociis:
The court noted that Entry 39 enumerated items related to pigments, paints, varnishes, and their diluents and thinners. Applying the principles of ejusdem generis (general words following specific words are interpreted in the context of the specific words) and noscitur a sociis (a word is known by the company it keeps), the court found that "tol thinners" and "auto thinners" did not belong to the same category as the items listed in Entry 39(d).

Conclusion:
The court concluded that "tol thinner" and "auto thinner" did not fall under Entry 39(d) of Schedule C but under Entry 22 of Schedule E. Consequently, they were taxable at the rates applicable to goods under Entry 22, read with Entry 39 of the notification issued under section 41 of the Act. The question referred to the court was answered in the negative, favoring the assessee, with no order as to costs.