1981 (12) TMI 149 - HC - VAT and Sales Tax

Tribunal Decision Upheld: Lime Varieties Classified as 'Dyes and Chemicals' for Sales Tax

The Court upheld the Tribunal's decision, ruling in favor of the assessee, determining that all lime varieties, including merta, sojat, and gotan lime, ... Dyes and chemicals - intermediary chemical product - noscitur a sociis - residuary entryDyes and chemicals - intermediary products - noscitur a sociis - residuary entry - Whether merta lime, sojat lime and gotan lime are intermediary chemicals covered by entry 9 of Schedule II, Part A, or fall under the residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969. - HELD THAT: - The Court applied the principle of noscitur a sociis to construe the phrase 'dyes and chemicals' so that 'chemicals' takes the meaning suggested by the word 'dyes' and therefore denotes intermediary chemical products rather than end-products. Reliance was placed on this Court's decision in Gujarat Distributors which held that the term 'chemicals' in an analogous entry denotes intermediary products. The Tribunal's factual findings - that the three varieties of lime are used as ingredients in the preparation of mortars and in whitewash and are not directly used as finished building materials - were accepted. Authoritative technical texts quoted in the judgment (Encyclopaedia Britannica and other standard works) corroborate that lime (calcium oxide and its commercial forms) is a chemical used as a cementing or intermediary agent in construction. On these legal and factual foundations, the three varieties of lime fall within the category of 'chemicals' as intermediary products and are therefore covered by entry 9 of Schedule II, Part A, and not by the general residuary entry 13 of Schedule III.The three varieties of lime are intermediary chemicals covered by entry 9 of Schedule II, Part A, and not goods taxable under residuary entry 13 of Schedule III.Final Conclusion: Reference answered against the revenue and in favour of the assessee: merta, sojat and gotan limes are intermediary chemicals within entry 9 of Schedule II, Part A; no order as to costs. Issues:Interpretation of tax entries for lime varieties in sales tax assessment.Analysis:The case involved a registered dealer in building construction materials, including lime varieties like merta, sojat, and gotan lime. The Sales Tax Officer initially held that only sojat and gotan lime were covered under entry 9 of Schedule II, Part A, while merta lime fell under the residuary entry 13 of Schedule III. The Assistant Commissioner disagreed, stating that all lime varieties were of the same type and quality. The Deputy Commissioner, however, revised the assessment, taxing all lime varieties under the residuary entry. The Tribunal later held that all three lime varieties were covered by entry 9 of Schedule II, Part A, as they were used as building materials, specifically in mortar and whitewashing. The Tribunal emphasized that lime was not a direct building material but an intermediary product, supporting its decision with expert opinions and standard references.The critical question revolved around whether the lime varieties fell under entry 9 of Schedule II, Part A, as 'dyes and chemicals,' or under the general residuary entry 13 of Schedule III. The Court referred to a previous judgment regarding the interpretation of the term 'chemicals' in a similar tax entry. The Court emphasized that for an article to qualify as 'chemicals,' it must be an intermediary chemical product used to produce finished goods. Considering the evidence presented, including expert opinions and standard references, the Court agreed with the Tribunal's finding that merta, sojat, and gotan lime were indeed covered by entry 9 of Schedule II, Part A, as they were used in mortar and whitewash production, serving as intermediary agents in the building construction industry.The Court highlighted that lime, especially hydraulic lime, was extensively used in the building industry as a cementing material, akin to portland cement. The Court concluded that lime was an intermediary product used to obtain the end-product for construction purposes, thus falling under the definition of 'chemicals' in the tax entry. Ultimately, the Court upheld the Tribunal's decision, ruling in favor of the assessee and answering the referred question against the revenue.