2018 (11) TMI 1145 - HC - VAT and Sales Tax

Interpretation of 'tyres' in Tax Act: Assess under State not Central Act

The Excise & Taxation Commissioner, Himachal Pradesh, Kasumpti, Shimla-9 Versus M/s Shivalik Tyres, Kumar Hatti, District Solan, H.P.

The court ruled that the term 'tyres' in the Central Sales Tax Act, 1956 does not include rubber tyres, leading to the assessee being assessed under the ... Classification of goods - tyres - Whether under section 14 in Chapter-IV “Goods of special importance in inter-state trade or commerce” of CST Act, 1956, subentry (XIV) of main entry No. (IV) containing reference to “tyres” could be construed as tyres made of “rubber” even when the main classification is of ‘Iron and Steel’? - Applicability of CST Act, 1956. Held that:- The word “tyres” in entry (xiv) of sub-section (iv) of Section 14 of the ‘Central Act’ cannot be read in isolation and has to be read in the group of items in which the entry is made. Sub-section (iv) starts with the words “iron and steels”, thus items referred to in entry (xiv) necessarily has to be read contextually in that background along with other entries being the ‘wheels, tyres, axles and wheels sets’. Here the word “tyres” cannot be read so as to mean rubber tyres. It has to be read conjunctively with other entries, genus of which is iron and steel. Tyres necessarily would not acquire the connotation of rubber tyres so understood in common parlance, unlike a trader specifically dealing with the product. The principle to be adopted for construction of tariff entries is no longer res integra. In the absence of statutory definitions, excisable goods mentioned in tariff entries are to be construed according to the trade practice. The origin of the word “tyres”, as is so described in the dictionary, was in the 15th century denoting curved pieces of iron with which the carriage wheels were shod. In fact, it is also described as a strengthening band of metal fitted around the rim of a wheel especially of a railway vehicle. There can be a case where such tyres may be having a rubber covering, but then it would definitely not cover the activity of the Assessee who is in the business of retreading of rubber tyres - the entry “tyres” in the central legislation would not be construed as tyres retreaded with rubber, even though the main classification is that of iron and steel. Assessee would be liable to be assessed as per the ‘State Act’ and not the ‘Central Act’. Reference disposed off. Issues:1. Interpretation of the term 'tyres' under section 14 of the Central Sales Tax Act, 1956.2. Applicability of the Central Act or the State Act in assessing tax liability.Analysis:Issue 1: The primary issue in this case revolves around the interpretation of the term 'tyres' as mentioned in section 14 of the Central Sales Tax Act, 1956. The question raised was whether the term 'tyres' should be understood to include rubber tyres or be limited to tyres made of iron and steel. The court emphasized that the term 'tyres' cannot be read in isolation but must be considered in conjunction with the broader category of items listed in the same entry, which includes iron and steel products. The court cited precedents to highlight that in the absence of statutory definitions, goods mentioned in tariff entries should be construed according to trade practices. The court concluded that the term 'tyres' in the Central Act does not encompass rubber tyres, especially in the context of an entity engaged in retreading rubber tyres.Issue 2: The second issue pertains to the applicability of the Central Act or the State Act in assessing the tax liability of the assessee. The court clarified that there was no dispute regarding the imposition of tax on the assessee; the crux of the matter was determining whether the assessee fell under the purview of the Central Act or the State Act. The court reasoned that if the assessee's case fell within the scope of the Central Act, the tax liability would be lower. However, based on the interpretation of the term 'tyres' and the overall context of the legislation, the court held that the assessee should be assessed under the State Act rather than the Central Act.In conclusion, the court answered the reference question by ruling that the term 'tyres' in the Central legislation should not be construed to include rubber tyres, and therefore, the assessee would be liable to be assessed under the State Act. The judgment provides a detailed analysis of statutory interpretation, trade practices, and precedents to arrive at a sound legal conclusion regarding the tax liability of the assessee.