2014 (8) TMI 895 - HC - VAT and Sales Tax

Rate of tax - Whether even otherwise, where two views are possible in respect of the tyres and tubes of tractor on which the additional tax of one percent or three per cent was to be levied and in view of the fact that tyres and tubes of tractors were not excluded from the description of the goods mentioned at serial no.1 of Schedule II of VAT Act and other interpretation that tractor has not been mentioned at serial no.5 while cycle, cycle rickshaw have been mentioned, the view in favour of dealer has to be accepted - Held that - Tractor tyres and tubes are nowhere mentioned in any of the clauses of Section 14 of the Central Sales Tax Act,1956. It must be borne in mind that these are taxing statutes and have to be interpreted very strictly and the intention of Legislature is to be culled out from what is stated in the statute and not on mere presumption of what the legislature intended to say but did not say. Clause (xiv) of Section 14 of the Act, 1956 only mentions wheels, tyres, axles and wheels sets. Tractor tyres are not mentioned therein. Mere mention of Tyres in clause (xiv) cannot lead to the inference that tractor tyres and tubes are also included . The word Tyres follows the word wheels and is succeeded by the words axels and wheel sets . The doctrine of ejusdem generis provides that the word or words succeeding any word must partake of the same meaning or context or flavour as the word immediately proceeding it. So far as clause (a) of subsection 2 of Section 3-A is concerned Scheduled-II is specifically omitted therefrom which means that goods mentioned in Entry 125 of Scheduled-II will also be subject to levy of additional tax as goods other than declared goods in view of Entry I to the Notification dated 31.3.2011 - from a composite analysis of the various statutory provisions as well as the Notification dated 31.3.2011 and Notification dated 7.9.2012 it is seen that the only Entry under which Tractor tyres and tubes can be subjected to additional tax is Entry 1 of the Notification dated 31.3.2011 and such additional tax will be paid at 1% and not 3% under Entry 5 - Decided in favour of assessee.

Summary

Issues Involved:
1. Taxability rate of tractor tyres and tubes under VAT Act.
2. Interpretation of subsequent clarificatory notifications.
3. Applicability of favorable interpretation in cases of ambiguity.

Detailed Analysis:

1. Taxability Rate of Tractor Tyres and Tubes Under VAT Act:
The primary issue was whether tractor tyres and tubes should be taxed at an additional rate of 1% or 3% under the VAT Act. The revisionist argued that these items should be taxed at 1% as per Entry No. 1 of Notification No. 419 dated 31.3.2011, which covers goods described in Schedule II of the VAT Act, excluding declared goods. The Tribunal had erroneously determined the rate to be 3% under Entry No. 5, which generally covers tyres and tubes excluding those of cycles, cycle-rickshaws, and animal-driven vehicles.

2. Interpretation of Subsequent Clarificatory Notifications:
The subsequent Notification No. 898 dated 7.9.2012 clarified that tractor tyres and tubes were not included in the goods listed under Entry No. 5 of the earlier Notification dated 31.3.2011. This clarification indicated that the additional tax rate for tractor tyres and tubes should be 1%, aligning with Entry No. 1. The court acknowledged that the subsequent notification could be used to interpret the earlier ambiguous notification, supporting the revisionist's position.

3. Applicability of Favorable Interpretation in Cases of Ambiguity:
The court emphasized the principle that in cases of ambiguity in taxing statutes, the interpretation favoring the assessee should be adopted. The court cited multiple precedents to support this principle, including the Supreme Court's rulings in "Mauri Yeast India Pvt. Ltd. vs. State of U.P." and "Sun Export Corporation vs. Collector of Customs," which held that when two views are possible, the one favoring the assessee should be preferred.

Conclusion:
The court concluded that the only applicable entry for taxing tractor tyres and tubes was Entry No. 1 of the Notification dated 31.3.2011, which prescribed an additional tax rate of 1%. The Tribunal's order dated 23.01.2013 was deemed illegal and was set aside. All revisions were allowed, affirming that tractor tyres and tubes should be taxed at the additional rate of 1% and not 3%.