2015 (5) TMI 104 - HC - VAT and Sales Tax

Classification of goods - whether the Hooka, (brass/iron base) manufactured and sold by the petitioner is a utensil , for purposes of payment of sale tax under the Haryana General Sales Tax Act, 1973 - Held that - A Hooka, particularly in rural areas of the State of Haryana, is admittedly used to smoke tobacco at home. A hooka is also an integral part of social interactions in rural areas and is, therefore, used at home and in social and public interactions. A Hooka has a brass base fitted with two pipes. The first pipe is attached to an earthen pot where coal and tobacco are placed and the second pipe is used to puff tobacco smoke. The brass base is a receptacle used for storing water and for fixing the pipes of a Hooka. A Hooka, as referred to above, is used in rural societies, at home or outside and as it is a receptacle/container used for storing water, through which smoke is passed before it is inhaled it would necessarily partake the nature of a utensil. We are, therefore, inclined to hold that in the absence of any legislative intent to confine the meaning of the word utensil, to any particular place, mode or manner of user, the hooka manufactured by the petitioner must necessarily fall within the meaning of the word utensil . - Hooka and its parts manufactured/sold by the petitioner partake the nature of a utensil , liable to sales tax at the rate of 3 paise in a rupee. - Decided in favour of assessee.

Summary

Issues involved:
- Interpretation of the term "utensil" under the Haryana General Sales Tax Act, 1973

Detailed analysis:
The petitioner, engaged in the manufacture and sale of brass/iron Hookas, challenged the orders passed by the Deputy Excise & Taxation Commissioner, which held that Hookas are not "utensils" and are subject to sales tax under the general trade entry. The petitioner had initially treated Hookas as utensils and paid tax accordingly. However, a change in opinion by the Assessing Officer led to a dispute regarding the classification of Hookas. The Joint Excise and Taxation Commissioner allowed the appeal, considering Hookas as utensils. Subsequently, the revisional authority relied on a Sales Tax Tribunal order to hold that Hookas are not utensils, leading to recovery orders for tax shortfalls.

The main question addressed by the court was whether Hookas could be considered "utensils" for sales tax purposes under the Act. The State of Haryana had notified a tax rate for "ferrous and non-ferrous metal utensils," including pressure cookers. The court examined various dictionary definitions of "utensil," emphasizing that it refers to tools, receptacles, vessels, or containers used for various purposes, not limited to kitchen use. The court highlighted that legislative intent and common understanding should guide the interpretation of such terms in a taxing statute.

The court critiqued the Sales Tax Tribunal's opinion, which narrowly defined utensils as items used in kitchens, hotels, and restaurants, overlooking broader usage contexts. The court emphasized that Hookas, commonly used in rural areas for smoking and social interactions, qualify as utensils due to their functional nature as receptacles for water storage and smoke passage. The court concluded that Hookas manufactured by the petitioner indeed fall within the definition of "utensil" and should be taxed at the lower rate of 3 paise in a rupee.

In the final judgment, the court allowed the writ petition, quashed the disputed orders, and reinstated the original assessment orders, affirming that Hookas should be classified as utensils for sales tax purposes.