2013 (10) TMI 1332 - HC - VAT / Sales Tax

Sunglasses classified under residuary clause at 12.5% tax rate, not as spectacles under Entry 125 at 4%

The HC dismissed revision petitions challenging classification of sunglasses for tax purposes. The petitioner argued sunglasses should be classified under ... Classification of sunglasses - imposition of tax and penalty - rate of tax - Applicability of the principle of ejusdem generis - Whether Rajasthan Tax Board was legally justified in not classifying the 'sun-glasses' under Entry 125 of Schedule IV of Part A as 'Spectacles, parts & components thereof, contact lens and lens cleaner' taxable @ 4% but classifying under the residuary clause under Schedule V @ 12.5%? - HELD THAT:- The CTO recorded a finding of fact that in the trade spectacles and sunglasses are distinct product, known differently and used for different purposes and also observed that in Rajasthan while sunglasses are called dhoop ke chashme, spectacles are called nazer ke chashme, which finding has been upheld by the Tax Board as well. The submission of learned counsel for the petitioner that such a distinction was not warranted and there was no reason to read the said distinction in the entry cannot be accepted. It was well within the jurisdiction of the authorities below, while considering the issue involved, to record the finding based on the common parlance test as to what the product in issue is called in common parlance. From what has been considered hereinbefore, it is apparent that on applying common parlance test, the history of the entry and even the fundamental/basic meaning of the term 'spectacles' as indicated in the various dictionaries cited by learned counsel for the petitioner and the Hindi version of the Notification, it is apparent that entry spectacles in the Schedule is clearly related to and means corrective spectacles and the same in its sweep does not include sunglasses as sought to be projected/argued by the petitioner. Concurrent finding in this regard arrived at by three authorities below i.e. the Commercial Taxes Officer, Dy. Commissioner (Appeals) and Rajasthan Tax Board does not call for any interference. Accordingly, the question of law as formulated is answered against the petitioner-assessee, there is no substance in the present revision petitions and the same are, therefore, dismissed. Issues Involved:1. Classification of sunglasses under the VAT Act.2. Applicability of the principle of ejusdem generis.3. Interpretation of tax entries using common parlance vs. dictionary meaning.4. Validity of penalties imposed under Section 61 of the VAT Act.Issue-wise Detailed Analysis:1. Classification of sunglasses under the VAT Act:The primary issue was whether sunglasses should be classified under Entry 125 of Schedule IV of the VAT Act, which includes 'Spectacles, parts & components thereof, contact lens and lens cleaner' taxed at 4%, or under the residuary clause in Schedule V taxed at 12.5%. The Commercial Taxes Officer (CTO) (Anti Evasion) concluded that sunglasses should be classified under the residuary entry, taxable at 12.5%, and imposed a penalty for willful tax avoidance. The Deputy Commissioner (Appeals) upheld this decision, and the Rajasthan Tax Board maintained the tax rate but set aside the penalty.2. Applicability of the principle of ejusdem generis:The principle of ejusdem generis was discussed to determine whether sunglasses could be included in the entry for spectacles. The CTO noted that Entry 125 is restrictive and exhaustive, lacking genus and scope-enlarging words. Therefore, sunglasses could not be presumptively included. The principle dictates that general words following specific ones include only items of the same type, which in this case, did not apply to sunglasses.3. Interpretation of tax entries using common parlance vs. dictionary meaning:The court emphasized the common parlance test over dictionary meanings for interpreting tax entries. The Supreme Court's ruling in Commissioner of Central Excise v. Connaught Plaza Restaurant was cited, stressing that entries in taxing statutes should be construed according to their commercial or trade understanding. The court found that in common parlance, spectacles are associated with vision correction, while sunglasses are for protection from sunlight, thus not fitting under Entry 125.4. Validity of penalties imposed under Section 61 of the VAT Act:The CTO imposed a penalty under Section 61 for willful tax avoidance, upheld by the DC (Appeals). However, the Tax Board set aside the penalty, indicating that while the tax rate was correctly determined, the imposition of the penalty was not justified.Conclusion:The court concluded that the question of law regarding the classification of sunglasses was to be answered against the petitioner. The concurrent findings of the CTO, DC (Appeals), and Tax Board were upheld, affirming that sunglasses fall under the residuary entry taxable at 12.5%. The principle of common parlance was applied, and the restrictive nature of Entry 125 was emphasized, excluding sunglasses from its scope. The revision petitions were dismissed, with no order as to costs.