2013 (8) TMI 495 - HC - VAT and Sales Tax

Nature of Goods - Whether the Methanol and Methyl Alcohol are two names of the same commodity or they are different goods - Held that - Both on the basis of physical parameters as well as on the basis of chemical properties of the Methanol and Methyl Alcohol, there cannot be any bona fide issue qua the same being two names of the same commodity - there was no reason for directing any further examination by the Tribunal of the issue - British India Corporation Ltd., Kanpur vs. Commissioner of Sales Tax, U.P 1987 (2) TMI 490 - ALLAHABAD HIGH COURT - The assesse could not refer to any other name of the goods in the open market except for Methanol and Methyl Alcohol. There cannot be any concession on the issue of law by the representative of the department - It was an argument in desperation - Neither any material was on record before the tax authorities nor has otherwise been brought to the notice of the Court, so as to even prima facie establish that Methanol and Methyl Alcohol are known as two different commodities in the open market. Whether the assesse was liable to pay tax on Methanol as an unclassified item at the rate of 7% plus 1% or at the rate of 12% plus 1%, which was the tax applicable to Methyl Alcohol in terms of the Notification No. ST-II-3203/X-1012-1972 Held that - The Tribunal had committed a manifest error in treating the Methanol manufactured by the Assessee as distinct from Methyl Alcohol and therefore, committed a further error in treating it to be an unclassified item taxable at the rate of 7% plus 1%. The plea of the assessee that the scientific and technical meanings of the term or expressions need not to be applied in the matter of determination of a tariff or perceptions of products also has no application in the facts of the case. Suffice is to record that in the case in hand not only the meaning, which has been assigned to the commodity, namely, Methanol and Methyl Alcohol in the Text Book on the subject of Chemistry, but also that product in the Dictionaries has been taken into consideration by this Court, for coming to the conclusion that the Methanol and Methyl Alcohol are two names of the same commodity. The assessee could not refer to any other name of the goods in the open market except for Methanol and Methyl Alcohol. - Decided in favor of revenue.

Issues Involved:
1. Whether Methanol and Methyl Alcohol are two names of the same commodity or different goods.
2. Applicability of the rate of tax on Methanol under the U.P. Sales Tax Act and the Central Sales Tax Act.
3. Relevance of the principle of res judicata in tax matters.
4. The significance of the common parlance test versus scientific or technical definitions in tax classification.

Detailed Analysis:

1. Methanol and Methyl Alcohol as the Same Commodity:
The primary issue was to determine if Methanol and Methyl Alcohol are the same or distinct commodities. The court examined definitions from the OXFORD dictionary and the Random Dictionary and Directory of Plastics, both of which describe Methanol as another name for Methyl Alcohol. Additionally, a Text Book on Organic Chemistry by Arun Bahl and B.S. Bahl was referenced, explaining that Methanol and Methyl Alcohol are two names for the same chemical compound (CH3OH). The court concluded that Methanol and Methyl Alcohol are indeed the same commodity, both in chemical and physical properties.

2. Applicability of Tax Rates:
For the assessment year 1975-76, the Assistant Commissioner (Assessment) Sales Tax, Ghaziabad, initially taxed Methanol at 12% plus 1% as per Notification No. ST-II-3203/X-1012-1972 dated 29th September, 1972. The Tribunal later reduced the rate to 7% plus 1%, treating Methanol as an unclassified item. The High Court, upon review, found that the correct rate should be 12% plus 1% as Methanol and Methyl Alcohol are the same. The court also clarified that under Section 8(2)(b) of the Central Sales Tax Act, the applicable rate for inter-state sales should be the higher of 10% or the rate under the State Act, which in this case is 12% plus 1%.

3. Principle of Res Judicata in Tax Matters:
The court addressed the department's argument that the principle of res judicata does not apply in tax matters. It was noted that the previous High Court judgment did not provide reasons for treating Methanol and Methyl Alcohol as distinct commodities and thus did not serve as a binding precedent. The court emphasized that the applicable tax rate should be based on the prescribed rate under the relevant notification rather than previous erroneous assessments.

4. Common Parlance Test versus Scientific Definitions:
The court discussed the relevance of the common parlance test in tax classification, as argued by the assessee. The assessee cited examples and case laws suggesting that common parlance should prevail over scientific definitions. However, the court found that in this case, both scientific definitions and common usage in dictionaries and textbooks supported that Methanol and Methyl Alcohol are the same. Therefore, the common parlance test did not alter the conclusion.

Conclusion:
The High Court quashed the Tribunal's order dated 6th February 1990, which had treated Methanol as an unclassified item taxable at 7% plus 1%. The court ruled that Methanol and Methyl Alcohol are the same commodity and should be taxed at 12% plus 1% as per the relevant notification. The revision was allowed, and the court ordered no costs.

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