2007 (4) TMI 635 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of taxability of vulcanising solution used in tyre retreading work - Whether the vulcanising solution is a synthetic adhesive taxable at 16% or at general rate of 10%.

Analysis:
The High Court considered the question of whether the vulcanising solution used by the respondent-assessee in tyre retreading work should be taxed at 16% or at the general rate of 10%. The assessing authority imposed a 6% difference tax, claiming the solution was taxable at 16%. However, the Deputy Commissioner (Appeals) and the Tax Board held that it should be taxed at the general rate of 10%. The Revenue challenged this decision, arguing that the solution was a synthetic adhesive and should be taxed at 16%. The court noted that the common parlance test is crucial in interpreting the taxability of a commodity.

The Revenue contended that the vulcanising solution, comprising natural rubber, polymer, rubber compound, and solvent, was a synthetic adhesive taxable at 16%. On the other hand, the respondent argued that the solution should be taxed at 10% under the general residuary entry. The respondent relied on the principle of ejusdem generis, arguing that the entry for synthetic adhesives at 16% did not encompass solutions used in tyre retreading. The court examined relevant case law and the specific entry in question to determine the appropriate tax rate.

The court analyzed the entry in question, which specified a 16% tax rate for synthetic adhesives used by the paint industry. Applying principles of ejusdem generis and noscitur a sociis, the court concluded that the vulcanising solution used in tyre retreading did not fall under this specific entry. Despite the absence of detailed discussion on this entry in previous decisions, the court found it to be the only relevant entry for synthetic adhesives at 16%. Therefore, the court held that the assessing authority was incorrect in applying the 16% tax rate to the vulcanising solution, affirming that it should be taxed at the general rate of 10%.

In conclusion, the High Court dismissed the revision petitions, ruling that the vulcanising solution used in tyre retreading work was rightly taxable at the general rate of 10% under the relevant entry, not at the 16% rate specified for synthetic adhesives used in the paint industry. The court emphasized the importance of interpreting taxability based on specific entries and applicable legal principles.