2004 (10) TMI 566 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "Fevicol MR" for tax purposes.
2. Classification of "Fevicryl acrylic colours" for tax purposes.
3. Applicable tax rate for "Fevicol MR" and "Fevicryl acrylic colours".
4. Interpretation of tax entries under the M.P. General Sales Tax Act, 1958.

Detailed Analysis:

1. Classification of "Fevicol MR" for Tax Purposes:
The primary issue was whether "Fevicol MR" (synthetic gum) should be classified as a stationery article under entry 21 of Part IV of Schedule II, or as an adhesive under entry 84 of Part III. The respondent (dealer) argued that "Fevicol MR" is a stationery item used for pasting envelopes, papers, and cards, and is sold by stationery shops to schools, colleges, and offices. The Board of Revenue accepted this classification, noting that "Fevicol MR" is distinct from "Fevicol SH", which is used in furniture and building activities and sold by hardware shops. The Court upheld this view, emphasizing that "Fevicol MR" is a stationery article and should be taxed as such under entry 21.

2. Classification of "Fevicryl Acrylic Colours" for Tax Purposes:
The second issue was whether "Fevicryl acrylic colours" should be classified as stationery articles or as paints under entry 20 of Part II. The respondent claimed these colours are used by students and artists for painting on paper and cloth, and are sold by stationery shops. The Board of Revenue agreed, finding that these colours are not industrial paints but rather items used for educational and artistic purposes. The Court supported this classification, noting that the term "paint" in entry 20 refers to industrial paints used for buildings and furniture, whereas "Fevicryl acrylic colours" are used for artistic purposes and sold in stationery shops.

3. Applicable Tax Rate for "Fevicol MR" and "Fevicryl Acrylic Colours":
The dispute also involved the applicable tax rate for these items. The respondent argued for a 6% tax rate under entry 21 of Part IV, while the Revenue contended for higher rates under entries 20 and 84. The Court concluded that both items fall under entry 21, which specifies a 6% tax rate for stationery articles. The Court rejected the Revenue's argument that "Fevicol MR" should be taxed under the newly introduced entry 84, stating that the Legislature did not amend entry 21 to exclude "Fevicol MR" when entry 84 was introduced.

4. Interpretation of Tax Entries under the M.P. General Sales Tax Act, 1958:
The Court emphasized the principle that entries in taxation statutes should be interpreted based on their popular meaning rather than scientific or technical definitions. It noted that the term "stationery articles" includes all items commonly used for writing and related activities, excluding only paper, paperboard, and newsprint. The Court found that both "Fevicol MR" and "Fevicryl acrylic colours" fit within this broad category of stationery articles based on their use, marketability, and the shops where they are sold.

Conclusion:
The Court answered the reference in favor of the dealer, holding that both "Fevicol MR" and "Fevicryl acrylic colours" are stationery articles taxable under entry 21 of Part IV of Schedule II of the Madhya Pradesh General Sales Tax Act, 1958. The Court emphasized the importance of interpreting tax entries based on their popular meaning and the actual use of the items in question. The decision was made without costs.