2015 (11) TMI 1494 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of sub-entry (xv) of entry 6 of Schedule B appended to the Bombay Sales Tax Act, 1959, was the Tribunal justified in law in holding that welding electrodes continue to be wire rods or wires even after they were coated with lime, sand and binding glue - Held that - statement of case and the reasons recorded by the Tribunal. Instead of repeating the same, it would be appropriate for us to quote the relevant paragraphs containing the reasons given by the Tribunal in its order - reasons given by the Tribunal, to our mind, are sound, legal and proper, and we fully agree with the reasoning given by the Tribunal - welding rods are covered under entry 6(xv) of Schedule B of the Bombay Sales Tax Act, 1959, and the same be subjected to tax - Appeal disposed of.

Issues:
Interpretation of sub-entry (xv) of entry 6 of Schedule B under the Bombay Sales Tax Act, 1959 regarding the classification of 'welding electrodes' as 'wire rods' or 'wires' after being coated with lime, sand, and binding glue.

Detailed Analysis:

1. Interpretation of Sub-Entry (xv) of Entry 6:
The Tribunal examined whether 'welding electrodes' fall under sub-entry (xv) of entry 6, which includes 'wire rods' and 'wires.' The Tribunal analyzed the wording of the entry, emphasizing that the derivatives described later refer back to the main items stated initially. The Tribunal concluded that 'wire rods' and 'wires,' even when coated with materials like copper, are covered under the same clause. The Tribunal highlighted that the term 'coated' should not be restricted to non-ferrous metal coating only, and all types of coating are included. The coating does not change the basic nature of the item, which remains an iron wire or wire rod.

2. Application of Qualifying Words:
The Tribunal discussed that the adjectives and qualifying words following 'wire rod' in the sub-entry apply to the item, supporting the inclusion of coated wires under sub-entry (xv). The coating of lime, sand, and glue on the iron wire was considered superficial and did not alter its fundamental nature. The purpose of the coating was to facilitate the welding process, and the nature of the product does not affect its taxation classification.

3. Legal Precedents and Interpretation:
Reference was made to a decision by the Karnataka High Court, which held that wire and wire rods falling within the same sub-entry of 'iron and steel' should not be taxed separately. The Tribunal agreed with this interpretation. The Tribunal also emphasized that any doubt regarding the interpretation of the entry should be resolved in favor of the assessee. The decision of the Bombay High Court in a similar case was cited to support the view that the item in question falls under sub-entry (xv).

4. Judgment and Conclusion:
The High Court agreed with the Tribunal's reasoning, finding it legally sound and proper. The Court allowed the appeal, setting aside the Commissioner of Sales Tax's order. It held that the 'welding electrodes' in question are covered by sub-entry (xv) of entry 6 and are not liable for additional taxation. The Court's decision aligned with the Tribunal's interpretation, affirming that the coated iron wire or wire rod falls within the specified sub-entry.

In summary, the High Court upheld the classification of 'welding electrodes' as 'wire rods' or 'wires' under sub-entry (xv) of entry 6, rejecting the need for additional taxation based on the coating applied to the iron wire. The judgment relied on a thorough analysis of legal provisions, precedents, and the specific wording of the entry to arrive at a comprehensive and legally sound decision.

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