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TMI Blog2016 (12) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods in the invoice is not something which would determine classification of their goods in a particular Entry. What has to be seen is whether the goods sold by the Appellant fit the description of a specific Entry in the tariff schedule and only when it does not fall within a specific Entry, the residuary Entry should be resorted to. RFCs manufactured and sold by the Appellant would be squarely covered by Schedule Entry C-55(v) of the MVAT Act and section 14(iv)(v) of the CST Act - appeal allowed - decided in favor of appellant. - MVXA TAX APPEAL NO. 1 OF 2016 IN VAT APPEAL NO. 403 OF 2013, NOTICE OF MOTION NO. 624 OF 2016 & CHAMBER SUMMONS (L) NO.1830 OF 2016 - - - Dated:- 23-12-2016 - S.C. DHARMADHIKARI B.P. COLABAWALLA JJ. Mr. V. Sridharan, Sr. Counsel with Mr. Prakash Shah, Mr. Rahul Thaker, Mr. Ansh Desai, Ms. Neha Ahuja i/b M/s Prompt Legal for Appellant. Mr. V.A. Sonpal, Special Counsel for Respondent State. Mr. Darius Shroff, Sr. Counsel with Mr. Jitendra Motwani, Mr. Ajay Aggarwal, Ms. Divya Jeswant i/b M/s Economic Law Practice for Applicant in Ch/Sum (L) No.1830 of 2016. JUDGMENT [ PER B. P. COLABAWALLA J. ]:- 1. By the present Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him under the provisions of the MVAT Act. (b) The Appellant is inter alia a manufacturer of various structural steel components such as rigid frame columns, rafters, sheets, angles, etc. in their factory in Pune. The Appellant has been engaged in the supply of the said structural steel components since 2007. The Appellant has regularly been filing returns and discharging its liability under the MVAT Act. (c) According to the Appellant, these structural steel components are fabricated / manufactured based on customer as well as geographical requirements etc. According to the Appellant, these individual components are then sold to the customers. The customers may subsequently optionally choose to avail the service of installation and erection by a sister concern of the Appellant or by a third party. Thus, according to the Appellant, the so-called pre-engineered buildings only emerge at the site of the customer after erection and after the completed sale of different components by the Appellant. (d) Until the year 2011, the Appellant had been collecting VAT from its customers at the rate of 12.5% on account of RFCs (Rigid Frame Columns) and Rafters and remitting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed in the Residuary Entry E-1 of the MVAT Act. (f) Being aggrieved by this order passed by Respondent No.2, the Appellant preferred an Appeal to the MSTT. By the impugned order dated 7th December, 2015, the MSTT upheld the DDQ order for the reasons, more particularly set out therein. It is in these circumstances, and being aggrieved by the impugned order passed by the MSTT, that the Appellants are before us questioning the legality and validity of the impugned order. 4. In this factual backdrop, Mr Sridharan, learned Sr. Counsel appearing on behalf of the Appellant, submitted that the RFCs sold by the Appellant are squarely covered by section 14(iv)(v) of the CST Act read with the Schedule Entry C-55(v) of the MVAT Act. Mr Sridharan submitted that the words steel structurals and as appearing in section 14(iv)(v) of the CST Act as well as the Schedule Entry C-55(v) of MVAT Act have not been defined anywhere either in the CST Act or the MVAT Act. He therefore submitted that in matters where a certain term or expression has not been defined in the relevant statute, the said term or expression must be considered in the same sense as it is construed by people who deal wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a building material are its strength, speed of erection, prefabrication and demountability. They are used in load-bearing frames in buildings and as members in trusses, bridges and space frames. Relying on all this material, Mr Sridharan submitted that the difference between a structure and steel structurals is quite clear. A structure would be a finally erected item whereas the steel structurals would be the individual components that are used to erect the said structure. In the present case, Mr Sridharan submitted that the Appellant is quite clearly supplying individual components and not the finally erected structure. In other words, it was the submission of Mr Sridharan that steel structurals and as appearing in section 14(iv)(v) of the CST Act read with Schedule Entry C-55(v) of the MVAT Act, were building components made of steel and which are used for load bearing purposes due to their high strength capabilities. 6. Mr Sridharan submitted that Respondent No.2 as well the MSTT had completely ignored the words steel structurals appearing in section 14(iv)(v) of the CST Act read with Schedule Entry C-55(v) of MVAT Act and came to a finding that the Appellant was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is added to a speech or piece of writing, it is separated from rest of the text using brackets, commas or DASHES. The purpose of a parenthesis is ordinarily to insert an illustration, explanation, definition, or additional piece of information of any sort into a sentence that is logically and grammatically complete without it. In other words, a parenthesis is defined to be an explanatory or qualifying clause, sentence, or paragraph, inserted in another sentence, or in the course of a longer passage, without being grammatically connected with it. Applying the aforesaid principle, Mr. Sridharan submitted that whilst interpreting section 14(iv)(v) of the CST Act and Schedule Entry C-55(v) of MVAT Act, the words appearing in parenthesis / brackets cannot be allowed to control the words appearing outside it viz. steel structurals . To further substantiate this argument, Mr Sridharan also placed reliance on the following decisions:- (a) Fuerst Day Lawson v/s Jindal Exports (2011) 8 SCC 333; and (b) Dozco v/s Doosan Infracore Co. Ltd. (2011) 6 SCC 179 9. In addition to the aforesaid pronouncements, Mr Sridharan also placed reliance on certain extracts from Justice G.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CST Act and Schedule Entry C-55(v) of the MVAT Act, what the authorities below had effectively done is that they had applied the principle of ejusdem generis in the reverse. Mr Sridharan submitted that it is settled law that this can never be done. In the present case, in the concerned sub-entries [section 14(iv)(v) of the CST Act and Schedule Entry No.C-55(v) of the MVAT Act], specific terms such as angles, joists, channels, tees, sheet piling sections, Z sections are followed by a general term or any other rolled sections . The authorities below had applied the above principle of ejusdem generis in the reverse direction by drawing a meaning from the general term ( or any other rolled sections ) used in the later portion and applying it to specific terms used in the earlier portions of the sub-entries. In other words, the authorities below concluded that even the specific terms namely angles, joists, channels, tees, sheet piling sections, Z sections should be rolled sections . This, according to Mr Sridharan, is an absolute incorrect application of the principle. In this regard, Mr Sridharan placed reliance on the decision of the Supreme Court in the case of Thakur Ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise. 1991 Supp (1) SCC 125 : (1991) 51 ELT 165 (SC) 13. In the alternative to the above arguments, Mr Sridharan submitted that in any case, the RFCs sold by the Appellant, and which form the subject matter of the DDQ Application, in any event are covered by the term 'joists' appearing in section 14(iv)(v) of the CST Act and Schedule Entry No.C-55(v) of the MVAT Act. In support of this argument, Mr Sridharan brought to our attention the following:- (i) In the Indian Standards IS 800 of 2007, General Construction, published by Bureau of Indian Standards columns and beams are defined as follows:- 1.3.6 Beam A member subjected predominantly to bending. 1.3.16 Columns A member in upright (vertical) position which supports roof or floor system and predominantly subjected to compression. (ii) In the British Standards No.5950-1-2000, a column is defined as follows:- 1.3.7 column a vertical member carrying axial force and possibly moments. (iii) Wikipedia defines columns, beams, rafters as follows : A column or pillar in architecture and structural engineering is a structural element that transmits, through compression, the weight of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the construction of a steel building of which all are not steel structurals. This job is done by a comprehensive contract to design, fabricate, supply and with or without erection of components, of steel buildings. Mr Sonpal submitted that the Taxation Enquiry Committee formed in 1953-54 inter alia recommended control of the rate of tax on goods which are of special importance in inter- State trade or commerce. Consequently, the CST Act was enacted and in section 14 thereof, several items were enumerated as items of special importance in inter-State trade or commerce. Section 15 provided for a cap on the rate of tax that every State sales tax law could levy not exceeding a certain percentage, which is varied from time to time. Thereafter, by amendment (with effect from 1st April, 1973) section 14(iv) was recast with the words iron and steel, followed by words that is to say with 16 sub-entries which were restrictive, exhaustive, enumerative and descriptive, stating in the items therein as to what would be covered by section 14(iv). No items other than what are described in the 16 sub-entries in section 14(iv) would be goods of special importance and controlled by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sonpal submitted that only rolled steel structurals such as rolled angles, rolled joists, rolled channels, rolled tees, rolled sheet piling sections, rolled Z sections or any other rolled sections are covered under section 14(iv)(v) of the CST Act and Schedule Entry C-55(v) of the MVAT Act and nothing else. If these are not rolled sections, then even angles, joists, channels, tees, sheet piling sections, Z sections etc. cannot fall within the said section or the concerned Schedule Entry C-55(v). He submitted that in the facts of the present case, it is an admitted fact that the products of the Appellant are not rolled but are fabricated from plates. They are welded. This being the position, clearly the goods of the Appellant cannot fall under section 14(iv)(v) of the CST Act or Schedule Entry C-55(v) of the MVAT Act. 18. According to Mr Sonpal, the RFCs of the Appellant are not manufactured by any rolling process but are fabricated by various processes. Due to this, an altogether new commercial commodity comes into being viz. pre-fabricated building components and cannot be described as (angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid provision but only those steel structurals that fit the description of angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sections . 20. At the outset, we must mention here that even though Mr Sonpal has fairly conceded that the RFCs sold by the Appellant would fall within the term steel structurals , even otherwise, on the material produced by the Appellant and which has been referred to by us earlier whilst recording the submissions of Mr Sridharan, we are independently satisfied that the RFCs manufactured and sold by the Appellant would clearly be covered by the term steel structurals as understood in its normal sense. The question therefore that needs to be addressed by us is whether the RFCs sold by the Appellant falls within section 14(iv)(v) of the CST Act and Schedule Entry C-55(v) of the MVAT Act keeping in mind the arguments canvassed by Mr. Sonpal. In other words, what we have to examine is whether the words steel structurals appearing in the aforesaid two provisions is controlled by or restricted in its meaning by the words angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (5 of 1986); (ii-b) cotton yarn, but not including cotton yarn waste; (ii-c) crude oil, that is to say, crude petroleum oils and crude oils obtained from bituminous minerals (such as shale, calcareous rock, sand) whatever their composition, whether obtained from normal or condensation oil-deposits or by the destructive distillation of bituminous minerals and whether or not subjected to all or any of the following processes:- (1) decantation; (2) de-salting; (3) dehydration; (4) stabilisation in order to normalise the vapour pressure; (5) elimination of very light fractions with a view to returning them to the oil deposits in order to improve the drainage and maintain the pressure; (6) the addition of only those hydrocarbons previously recovered by physical methods during the course of the abovementioned processes; (7) any other minor process (including addition of pour point depressants or flow improvers) which does not change the essential character of the substance; (ii-d) Aviation Turbine Fuel sold to an aircraft with a maximum take-off mass of less than forty thousand kilograms operated by scheduled airlines. Explanation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut (Arachis hypogaea); (ii) Sesamum or Til (Sesamum orientale); (iii) Cotton seeds (Gossypius Spp.); (iv) Soyabean (Glycine seja); (v) Rapeseed and Mustard- (1) Torea (Brassica compestris var toria); (2) Rai (Brassica juncea); (3) Jamba-Taramira (Eruca Satiya); (4) Sarson, yellow and brown (Brassica compestris var sarson); (5) Banarsi Rai or True Mustard (Brassica nigra); (vi) Linseed (Linum usitatissimum); (vii) Castor (Ricinus communis); (viii) Coconut (i.e., Copra excluding tender coconuts) (Cocos nucifera); (ix) Sunflower (Helianthus annus); (x) Nigar seed (Guizotia abyssinica); (xi) Neem, vepa (Azadirachta indica); (xii) Mahua, illupai, Ippe (Madhuca indica M. Latifolia Bassia Latifolia and Madhuca longifolia syn. M. Longifolia); (xiii) Karanja, Pongam, Honga (Pongamia pinnata syn. P. Glabra); (xiv) Kusum (Schleichera oleosa syn. S. Trijuga); (xv) Punna, Undi (Calophyllum inophyllum); (xvi) Kokum (Carcinia indica); (xvii) Sal (Shorea robusta); (xviii) Tung (Aleurites fordii and A. moantana); (xix) Red palm (Elaeis guinensis); (xx) Safflower (Carthanus tinctor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iron and cast iron including ingots, moulds, bottom plates, iron scrap, cast iron scrap, runner scrap and iron skull scrap; (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes); (iii) skelp bars, tin bars, sheet bars, hoe bars and sleeper bars; (iv) steel bars (rounds, rods, square flats, octagons and hexagons, plain and ribbed or twisted in coil form as well as straight lengths); (v) steel structurals (angles, joints, channels, tees, sheet pilling sections, Z sections or any other rolled sections); (vi) sheets, hoops, strips, and skelp, both black and galvansied, hot and cold rolled, plain and corrugated, in all qualities in straight lengths and in coil form as rolled and in revetted conditions; (vii) plates both plain and chequered in all qualities; (viii) discs, rings, forgings and steel castings; (ix) tool, alloy and special steels of any of the above categories; (x) steel melting scrap in all forms including steel skull, turning and boring; (xi) steel tubes, both welded and seamless, of all diameters and lengths, including tube fittings; (xii) tin plate, both hot dipped and electrolytic a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring in the parenthesis in section 37 of the 1996 Act was significant as it clearly pointed out that unlike section 37 even though an order was not appealable under section 50, it would be subject to an appeal under the Letters Patent of the High Court. Whilst considering this argument, the Supreme Court observed as under:- 45. According to The New Oxford Dictionary of English, 1998 Edn., brackets are used to enclose words or figures so as to separate them from the context. 46.Oxford Advanced Learner's Dictionary, 7th Edn., defines bracket to mean either of a pair of marks, ( ) placed around extra information in a piece of writing or part of a problem in mathematics. (emphasis supplied) 47.The New Oxford Dictionary of English, 1998 Edn., gives the meaning and use of parenthesis as: Parenthesis.-noun (pl. parentheses) a word, clause, or sentence inserted as an explanation or afterthought into a passage which is grammatically complete without it, in writing usually marked off by brackets, dashes, or commas. -(usu. Parentheses) a pair of round brackets ( ) used to include such a word, clause, or sentence. (emphasis supplied) 48.Oxford ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Mr Dave's submission that the words in parenthesis are surplusage and in essence the provisions of Section 39 of the 1940 Act or Section 37 of the 1996 Act are the same as Section 50 of the 1996 Act. Section 39 of the 1940 Act says no more and no less than what is stipulated in Section 50 of the 1996 Act. But there may be a different reason to contend that Section 39 of the 1940 Act or its equivalent Section 37 of the 1996 Act are fundamentally different from Section 50 of the 1996 Act and hence, the decisions rendered under Section 39 of the 1940 Act may not have any application to the facts arising under Section 50 of the 1996 Act. But for that we need to take a look at the basic scheme of the 1996 Act and its relevant provisions. 24. What can be discerned from the aforesaid decision is that words, clauses or a sentence appearing in parenthesis / brackets are inserted in a passage as an explanation or an afterthought, which is otherwise also, grammatically complete without it. To put it simply, the purpose of a parenthesis is ordinarily to insert an illustration, explanation, definition or additional piece of information of any sort into a sentence that is logically a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there is no express exclusion of Part I of the Act. It is not possible to accept this contention for the simple reason that a bracket could not be allowed to control the main clause. The bracketed portion is only for the purposes of further explanation. In my opinion, Shri Gurukrishna Kumar, learned counsel appearing on behalf of the respondent, is right in contending that the bracketed portion is meant only for the convenience of the Arbitral Tribunal and/or the parties for conducting the proceedings of the arbitration, but the bracketed portion does not, in any manner, change the seat of arbitration, which is only Seoul, Korea. The language is clearly indicative of the express exclusion of Part I of the Act. If there is such exclusion, then the law laid down in Bhatia International v. Bulk Trading S.A. [(2002) 4 SCC 105] must apply holding: (SCC p. 123, para 32) 32. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-State trade or commerce. We do not think that it can seriously be suggested that a round or a square or an octagonal steel bar would be goods of special importance in inter-State trade or commerce, whereas an oval steel bar would not. Such a conclusion would be illogical. The shape of the steel bar cannot determine whether it is a product/goods of special importance in inter-State trade or commerce. We therefore find that there is intrinsic evidence in the aforesaid provisions that would indicate that the words mentioned in the brackets appearing in section 14(iv)(iv) and 14(iv)(v) of the CST Act and Schedule Entry C-55(iv) and C-55(v) of the MVAT Act are descriptive and illustrative and do not restrict the width and amplitude of the words appearing outside it (viz. steel bars and steel structurals respectively). We are therefore unable to agree with Mr Sonpal that the RFCs sold by the Appellant cannot be classified as steel structurals because they are not angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sections. As mentioned earlier, these words are only illustrative and descriptive of the words steel structurals and do not restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jagirs Act 6 of 1952 was challenged under Article 32 of the Constitution of India. One of the grounds on which the said Act was challenged, was that it did not provide for adequate compensation, nor was there any public purpose involved in it, was discriminatory and was not saved by Article 31-A of the Constitution of India. As far as Article 31-A was concerned, it was contended that Bhomicharas were not holders of jagirs or other similar grants within the meaning of Article 31-A because a jagir could be created only by a grant by the Ruler and that the Petitioner could not be said to hold under a grant from Jodhpur because they had obtained the territory by right of conquest long before Jodhpur established its suzerainty. While dealing with this contention the Supreme Court observed thus: We agree with the petitioners that a jagir can be created only by a grant, and that if it is established that Bhomichara tenure is not held under a grant, it cannot be classed as a jagir. We do not base this conclusion on the ground put forward by Mr Achhru Ram that the word jagir in Article 31-A should be read ejusdem generis with other similar grants because the true scope of the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power looms from cotton and woollen yarn . Dryer felts are, therefore, clearly woven fabrics and must be held to fall within the ordinary meaning of the word textiles . We do not think that the word textiles has any narrower meaning in common parlance other than the ordinary meaning given in the dictionary, namely, a woven fabric. There may be wide ranging varieties of woven fabric and they may go on multiplying and proliferating with new developments in science and technology and inventions of new methods, materials and techniques, but nonetheless they would all be textiles. The analogy of cases where the word vegetables was held not to include betel leaves or sugar-cane is wholly inappropriate. There, what was disapproved by the Court was resort to the botanical meaning of the word vegetables when that word had acquired a popular meaning which was different. It was said by Holmes, J., in his inimitable style: A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used . Where a word has a scientific or technical meaning and also an ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmonly used in paper making or other machinery.... . This reference in a statute which is intended to apply, to imports made by the trading community clearly shows that dryer felts which are woven textile felts.....of a kind commonly used in paper making machinery are regarded in common parlance, according to the sense of ordinary traders and merchants, textile fabrics. We have, therefore, no doubt that dryer felts are textiles within the meaning of that expression in Item 30 of Schedule B . 32. This decision of the Supreme Court was thereafter followed by our Court in the case of CST Vs. Agarwal Co. 1983 (52) STC 117 (Bom) Paragraph 7 of this judgment reads thus: In the case of Porritts Spencer (Asia) Ltd. Vs. State of Haryana reported in 42 S.T.C. 433 the SC was required to consider the interpretation of the term 'textiles'. The SC observed that in interpreting any word in any entry, one should bear in mind that it does not embody a static concept. It is the skin of a living thought, and may change its hue with new developments in technology and emergence of new items and processes. A term in a fiscal legislation should be interpreted having reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion given in the invoice should be identical or match with the description given in the tariff schedule. In the facts of the present case what is important to note is that the invoice specifically states Supply of Pre-Fabricated Building Components (AS PER PACKING SLIP) . If we peruse the packing slip, it clearly enumerates the goods supplied as Rigid Frame Columns and Interior Columns . We, therefore, find that the MSTT erroneously concluded that the Appellants were selling Pre-Fabricated Building Components and hence could not be classified in Schedule Entry C- 55(v) of the MVAT Act or section 14 (iv)(v) of the CST Act. What is important to note is that the invoice itself mentions the word components which have been specifically described in the packing slip. One of the components is a Rigid Frame Column . What one therefore has to see is whether the Rigid Frame Column sold by the Appellant would fall within Schedule Entry C-55(v) of the MVAT Act or section 14(iv)(v) of the CST Act. The description of the goods in the invoice can never be a decisive factor to determine whether they fall within a particular Entry. These principles are too well settled but if one requires an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the description given by the Assistant Collector in the assessment order is only (a) that the poles produced by the appellant are not ordinary pipes and tubes which convey a fluid from one place to another and (b) that they are manufactured by a very elaborate and sophisticated process. So far as the first point is concerned, it will be appreciated that, just as pipes and tubes are generally intended to carry a fluid from one place to another, the poles with which we are concerned enable wires to be passed through them for the transmission of electric energy, a function not very very different in nature from that of other ordinary pipes and tubes. That apart, even tubes and pipes are not always necessarily used for such purpose. They can be used as flag masts or for purposes of scaffolding or other purposes where they do not serve as a medium for the transmission of a fluid. This is not, therefore, a sound objection. In regard to the second point, it is perhaps sufficient to point out that sub-item (iv) of Item 26-AA refers to pipes and tubes (includings blanks thereof) all sorts, whether rolled, forged, spun, cast, drawn, annealed, welded or extruded. It is comprehensi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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