2019 (10) TMI 94 - HC - VAT and Sales Tax

Classification of goods - compressed air and cooled air - whether rightly assessed to tax under Entry No. 55 (All type of gases such as Oxygen, Hydrogen etc.,) of Part III of Schedule II of the M.P. Vanijyik Kar Adhiniyam, 1994 in the reassessment, instead of residuary Entry No. 39 of Part IV, Schedule II, of the M. P. Vanijyik Kar Adhiniyam, 1994 as in the original assessment? HELD THAT - As per the definition of air, as defined under the Oxford Dictionary, 'air' is a noun and is defined as invisible gaseous substance surrounding the earth, a mixture mainly of oxygen and nitrogen. The Cambridge Dictionary defines 'air' as mixture of gases that surrounds the earth and that we breathe - Entry 55 makes it very clear that it includes different types of gases. The opening sentence of the entry includes 'all types of gases' and the sentence completes with the words 'etc.,'. The interpretation of the entry makes it very clear that all types of gases whether it is Oxygen, Hydrogen or mixture of gases are to be treated under Entry 55 Part III schedule II. In the present case, the assessee is supplying compressed air and cooled air and, therefore, the compressed air includes all types of gases. It has to be charged under Entry 55 Part III schedule II. The apex Court in the case of ROYAL HATCHERIES PVT. LTD. VERSUS. STATE OF AP 1993 (10) TMI 85 - SUPREME COURT has held that the rule-making authority chose to limit the meaning of 'livestock' in the said clause only to domestic animals mentioned therein and it was also held that the use of words 'such as' indicate that what are mentioned thereafter are only illustrative and not exhaustive - It was also held that the clause which is subject matter of scrutiny in the aforesaid case, ends with the words 'etc.,' which does mean that some more domestic, in addition to those specifically mentioned therein, are also included within the meaning of the word 'all domestic animals'. Thus, this Court is of the considered opinion that the entry No. 55 Part III Schedule II is very specific and clear on the subject as all type of gases such as Oxygen and Nitrogen are covered under it and air which is also a mixture of Oxygen and Hydrogen and some other gases are also included under Entry 55 Part III of Schedule II - decided in favor of Revenue.

Summary

Issues Involved:
1. Classification of compressed air and cooled air for taxation under the MP Commercial Tax Act, 1994.
2. Interpretation of Entry 55 Part III Schedule II vs. Entry 39 Part IV Schedule II.
3. Application of common parlance and scientific definitions in tax law.
4. Burden of proof in tax classification disputes.

Detailed Analysis:

1. Classification of Compressed Air and Cooled Air for Taxation:
The primary issue was whether compressed air and cooled air should be taxed under Entry 55 Part III of Schedule II (which covers "all types of gases such as Oxygen, Hydrogen, etc.") or under the residuary Entry 39 Part IV of Schedule II of the MP Commercial Tax Act, 1994.

2. Interpretation of Entry 55 Part III Schedule II vs. Entry 39 Part IV Schedule II:
The court examined the relevant entries under the MP Commercial Tax Act, 1994:
- Entry 55 of Part III Schedule II: "All types of Gases such as Oxygen, Hydrogen etc."
- Entry 39 of Part IV Schedule II: "All other goods not included in Schedule I or any other part of this Schedule."

The assessee argued that compressed air and cooled air are not types of gases and should be classified under the residuary Entry 39. The court, however, found that the language of Entry 55, which includes "all types of gases" and ends with "etc.," was broad enough to encompass compressed air and cooled air.

3. Application of Common Parlance and Scientific Definitions in Tax Law:
The court considered the definitions of "air" and "gas" from various dictionaries. It noted that air is a mixture of gases, primarily oxygen and nitrogen, and thus falls within the scope of Entry 55. The court referenced the judgment in Royal Hatcheries Pvt. Ltd. v. State of A.P., which emphasized that terms like "such as" are illustrative and not exhaustive, supporting a broader interpretation.

4. Burden of Proof in Tax Classification Disputes:
The court acknowledged the principle that the burden to show that a product falls within a particular tariff item lies with the Revenue, as established in Commissioner of Central Excise v. Sharma Chemical Works. However, it found that the Revenue had met this burden by demonstrating that compressed air and cooled air fit within the broad category of "all types of gases."

Conclusion:
The court concluded that compressed air and cooled air are indeed covered under Entry 55 Part III of Schedule II of the MP Commercial Tax Act, 1994. The court held that the M.P. Commercial Tax Appellate Board was correct in assessing tax on these commodities at 13.8% under this entry. The "Reference" was thus answered in favor of the Revenue, affirming the broader interpretation of the term "gases" to include air in its compressed and cooled forms.