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TMI Blog2003 (2) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... re assessed to tax at 11 per cent or 12 per cent, as the case may be, on the manufactured products of the petitioner/assessee. During the inspection on July 23, 2002, it was found that the petitioners were manufacturing grinding wheels of various kinds and sizes, sander disc, flint papers and other similar items. On verification of records, it was found that they have been paying tax at 16 per cent in respect of emery cloth and flint paper and paying tax at 11 per cent or 12 per cent in respect of other items including grinding wheel of various kinds, claiming them as "machine operated abrasives". In the meantime, the learned Special Commissioner and Commissioner of Commercial Taxes, Chennai-5 has issued the clarification, dated September 19, 2002 and following the said clarification, the assessing officer has issued the impugned assessment order dated October 31, 2002. The petitioner who have been paying taxes at 11 per cent for grinding wheel have felt that the impugned assessment order dated October 31, 2002 had imposed extra burden on them. They had driven to the dire necessity of filing these original petitions challenging the impugned assessment as well as the impugned clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcised by the High Court not unreasonably or perversely, it is the settled practice of the Supreme Court not to interfere with the exercise of discretion by the High Court." Learned Senior Counsel for the petitioner has relied on a decision of the Madras High Court in Union of India v. T.S.R. & Co. (1985) 22 ELT 701 (Mad.) wherein it was held: "If the classification of a product is found to be arbitrary and unreasonable so as to make it perverse, the High Court will be justified in interfering with that classification under article 226 of the Constitution." Following these three decisions, it is better to consider the impugned clarification in Act. Cell-II/63026/2002 dated September 19, 2002. It seems that the Joint Commissioner (CT), Enforcement I, Chennai-6 in his letter, has reported that emery belt, sander disc would fall under entry No. 18(xii) in Part E of the First Schedule to the Act, taxable at 16 per cent as clarified by the Special Commissioner and Commissioner of Commercial Taxes in Ref No. D. Dis. Acts Cell-II/35734/99 dated July 28, 1999 and similar products like grinding wheel and coated abrasives and bonded abrasives would also fall under entry 18(xii) in Part E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from July 20, 2002: T.N.G.S.T. Act-First Schedule-Part E-16 per cent. S. No. Description of the goods Point of levy in the State 7(ix) All other materials used in painting and varnishing such as flint papers, emery clothes, brushes, paint removers and stainers of all kinds. First sale. The impugned assessment orders dated October 31, 2002 question the inclusion of such items, specially grinding wheel in entry 7(xi) in Part E of the First Schedule to the Act, taxable at 16 per cent. A reading of the impugned clarification dated September 19, 2002 would make us to feel that taking into account of the "functional character of the products", they were grouped under item 7(xi) in Part E of the First Schedule to the Act. 5.. Added to that, learned Special Commissioner and Commissioner of Commercial Taxes has relied on the decision of the Sales Tax Appellate Tribunal, Additional Bench, Chennai, in S.T.A. No. 847 of 2000 dated October 12, 2001 wherein it was held that "while considering the tax on sander disc, emery belt and roll, on perusal of the records, it is seen that the above items fall under item 18(xii) of the Part E of the First Schedule to the Act and liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court held: "In determining the meaning or connotation of words and expressions describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly wellsettled, it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted." In Atul Glass Industries (P) Ltd. v. Collector of Central Excise [1986] 63 STC 322, their Lordships of the Supreme Court have held: "It is generally by its functional character that the product is so identified. It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Part E of the First Schedule to the Act deals with materials used in painting and varnishing. A scrutiny of the materials stated in entry No. 18(i) to (xii) in Part E of the First Schedule would go to show that they cannot be included under the said entry. Every material will have more than one use. The predominant and preferential use of such material would reveal the nature of use. Grinding wheel is an instrument which grinds, shapes and polishes the materials which are being shaped. In the above stated decisions of the Supreme Court, their Lordships have clearly stated that the "words" or "expressions" must be construed in the sense in which they are understood in the trade by the dealer and the customers. The name "grinding wheel" would never indicate such meaning that it is used for painting or varnishing. Basically, grinding wheel is an instrument not understood in the trade by the dealer or customer as a material used for painting or varnishing. The decision in [1986] 63 STC 322 (SC) [Atul Glass Industries (P) Ltd. v. Collector of Central Excise] clearly says that "when a consumer buys an article, he buys it because it performs a specific function for him". It cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hancing the rate of tax from 11 per cent or 12 per cent to 16 per cent cannot be held to be valid. 9.. In the impugned assessment order dated October 31, 2002, the assessing officer has stated that the rule of "contemporanea expositio" allows the learned Special Commissioner and Commissioner of Commercial Taxes, Chennai-5 to issue clarification. Their Lordships of the Supreme Court, in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India [1988] 68 STC 421 have held: "The rule of contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority though it must give way where the language of the statute is plain and unambiguous. In a modern progressive society it would be unreasonable to confine the intention of a Legislature to the meaning attributable to the word used at the time the law was made and, unless a contrary intention appears, an interpretation given to the words used should take in new facts and situations, if the words are capable of comprehending them." The rule of contemporanea expositio cannot be applied to the impugned clarification. From the foregoing reasons, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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