TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1048
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....ls within the serial No.69 of the Third Schedule appended to the KVAT Act 2003 and therefore, tax payable thereon is 4% which was subsequently enhanced to 5%. His grievance is that the authorities have now brought the said good under the residuary entry to tax at 12.5%. Therefore, the question of law that arise for our consideration in these proceedings is; "Whether Electrical Insulated Press Board commonly known as High Density Board is not paper and do not fall within the third schedule of serial No.69 of KVAT, 2003?" 4. The petitioner in the petition has clearly set out the process of manufacture of the Board, which reads as under: "1. The petitioner uses imported wood pulp to manufacture paper board. On import, the wood pulp is tested for fiber length, moisture content, mechanical and chemical properties. The Appellant imports sulphate pulp since the final product is used in transformers and press boards are good insulators. 2. The imported wood pulp is slushed in the Hydro Pulper and passed on to different stock preparation chests where impurities are removed and pulp is prepared. Firstly, pulp is converted into pulpslurry; the pulpslurry is treated to a required degree of....
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....ucts are cut into required sizes and is subjected for testing all required parameters as specified in the above specification. The said goods comply with the above specifications and for this reason these goods are called electrical grade paper and boards. The electrical grade insulation paper boards manufactured by the petitioner are known as electrical grade insulation paper products." 5. Learned Counsel for the assessee Sri R.V. Prasad contended that paper of all kinds mentioned in serial No.69 of the third Schedule is exhaustive to include all types of papers. Further, when the legislature in addition to the said phrase used phrase 'including' and in the end also used the expression 'excluding photographic paper', which means except the goods which is excluded, all goods which could be described as paper fall within the said definition. He further contended that when a particular goods has to be grouped under a particular entry or a residuary entry, the Courts have to be liberal in including the said goods expressed in the contents of the Act rather than it to be taxed under residuary entry. He further contended that if under the Act, a particular goods is not ....
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....ter proof paper, art boards, card boards, corrugated boards, duplex boards, pulp boards, straw boards, triplex boards and the like, but excluding photographic paper. (ii) Waste paper, paper waste and Newsprint." 9. Therefore, the goods which do not fall in any of the schedules were covered under Section 4(1)(b)ii under the heading 'other goods' and the rate of tax payable was 12.5%. In the instant case, the goods which is the subject matter of dispute is Electrical Insulated Press Board commonly known as High Density Board. The question is: Whether the goods falls under Serial No.69 or in the residuary Clause of 'other goods' or in other words, whether the tax payable is 4% or 12.5%? 10. Serial No.69 (i) of the KVAT Act, 2003, deals with 'Paper of all kinds' and 69(ii) deals with 'Waste paper, paper waste and Newsprint'. The word 'paper' has not been defined under the KVAT Act, 2003. The meaning of the word 'paper' as given in various dictionaries is as follows:- Chamber's Dictionary - A material made in thin sheets as an aqueous deposit from linen rags esparto, wood-pulp, or other form of cellulose, used for writing and prin....
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....ch is manufactured from renewable resources. The largest use for paper is in sheets of varied thickness, called paperboard, for packaging, followed by printing and writing papers and sanitary tissues. Substantial quantities of paper are impregnated with asphalt for use as roofing materials while other paper products are used as decorating materials, packaging materials, stamps, resin-impregnated laminates, and structural materials. The Encyclopedia Americana (International Edition Page 261) Paper: A matted or felted sheet of fibers - usually vegetable but sometimes mineral, animal, or synthetic - formed on a screen from a water suspension. The term "paper" is specifically limited to lighter weight, thinner, more flexible sheets formed in this manner. Sheets that are 0.012 inch (0.3 millimeter) or more in thickness, including Bristol board, container board, boxboard, wallboard, and so forth, are classified as paperboard. Paper derives its name from papyrus, a sheet of writing material made in ancient times by pasting together sections of Egyptian sedge (Cypreus papyrus), a marsh plant. In 'Encyclopaedia Britannica', (Volume 13), (15th Edition), 'paper' has been d....
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....of paper containing thin sheets of paper would not put it out of category of "paper" and therefore, would not cease to be paper and is covered by the expression used in explanation II to entry 16B. Thus the order made by the Tribunal affirming the view taken by the appellate authority in this regard is set aside. Respondents are directed to delete this turnover from the assessment made." 13. This Court in the case of Commissioner of Income Tax, Karnataka - II, Bangalore Vs. Senapathy Whiteley Limited reported in ITR V.158 Page 181, has held as under: "The learned counsel for the assessee has produced before us some pieces of insulation boards manufactured by the assessee. They are thin sheets akin to the thin file board or paper board. The National Test House, Alipore, Calcutta, which is a Government of India Test House, after examining similar samples of insulation boards manufactured by the assessee, has certified that the samples manufactured by the assessee may generally be classified as press papers of electrical trade grade. On the basis of the said certificate, the Central Excise authorities are levying excise duty at the same rate as leviable on paper. The industry of the....
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....on one side of the paper which will be generally used as a 'flag' and used for writing purpose falls under Entry 69(i) of the Third Schedule. The Commissioner after examining the matter held that by cutting the paper into different sizes with the adhesive, a new commercial commodity distinct from the paper which cannot fall under Entry 69 and Entry 71 of the Act. Hence the said commodity has to be regarded as an unscheduled item liable to be taxed under sub-Section 1(b) of Section 4 of the Act. The said order has been questioned in this appeal. 9. Reading of the above entries makes it clear that Entry 69(i) covers papers of all kind, it obviously makes it clear that all kinds of paper including the paper referred to "and the like" refers to papers of different kinds which was not mentioned in Entry 69(i). Entry 69(i) is the inclusive definition and it includes all kinds of paper "and the like". However, it excluded the photographic paper. In the instant case, the appellant is importing papers, the Customs Authorities have also treated it as paper with adhesive. The appellant cuts the papers into pieces and prepares 'post-it-paper' with adhesive on one side. It is g....
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....ndertake large scale printing of newspaper, or for writing or packing, is sold as waste paper. Some of the waste paper may be printed waste paper. The Tribunal has found that the paper that is sold by the assessee as waste paper, though considered as "waste paper" for the purpose of the assessee's business, can nevertheless be used for printing or writing or packing by others, that is, small dealers or printers or actual users. This apart, "paper" does not cease to be a paper merely because it is printed or is of a smaller size than what could be used for the printing of newspapers. So long as any paper, even waste paper, can be used for any purpose for which paper is normally used, it will continue to be paper. Thus even by applying the user test laid down in Kores case [1977) 39 STC 8 (SC), the waste paper in question will be "paper". 12. Entry 3 of Part P of the Second Schedule to the Act includes blotting paper, waterproof paper, ammonia paper, stencil paper and carbon paper, which are not used for writing, printing or packing purpose. Further the said entry specifically includes paper of all kinds. Hence, it has to be held that even if waste paper is not capable of being ....
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....derstood in common parlance and must be given its popular sense, meaning that sense with which people are conversant and while dealing with the articles would attribute to it. The word "cardboard box" is not the term of an art. It is a commercial article to be understood in the sense that people dealing with such an article can understand it and would attribute to it in the common parlance. 18. It is well-established that in a taxing statute there is no room for any intendment and regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption, it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. Salomon and Co. (1897 A.C. 22, 38: Intention of the legislature is a common but very slippery phrase, which, popularly understood may signify anything from i....
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....aper' forms part of the denomination of a specialised article is not decisive of the question whether the article is paper as generally understood. The word 'paper' in the common parlance or in the commercial sense means paper which is used for printing, writing or packing purposes. We are, therefore, clearly of opinion that carbon paper is not paper as envisaged by entry 2 of the aforesaid Notification." 18. The Apex Court in the case of Alladi Venkateswarlu and Others v. Government of Andhra Pradesh and Another reported in STC V.41 Pages 397 and 398, which has held as under: "It is clear that there is a distinction between "paddy" as found in item 8 of the Second Schedule, and "rice", as mentioned under item 66 of the First Schedule. Apparently, the removal of the husk makes this difference. It is true that the First schedule, which contains as many as 136 items, includes a number of separate fairly detailed entries. Entry 58 is for bran or husk of "rice", and entry 59 is for "deoiled bran of rice". It appears, therefore, that "rice in husk" is "paddy". When it is removed from husk, the husk and rice become separately taxable. But, there are no separate entries for ....
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....r 85 under Entry 8546.00 (Entry 7014 under the New Tariff Act prior to 1.3.1988). 30. It is the contention of the Central Excise Department that industrial laminates and glass epoxy laminates cannot be considered as electrical insulators because these sheets are required to be cut in the requisite shape and holes may have to be punched in them before they could be fitted as insulators. However, mere cutting or punching holes does not amount to manufacture. These sheets have insulating properties and are used as electrical insulators. They cannot be taken out of the category of electrical insulators only because they have to be cut to the requisite shape or a few holes may be required to be punched in them in order that they may fit into the electrical instrument/appliance in question. The Tribunal, therefore, has correctly classified there industrial laminates and glass epoxy laminates under Tariff Item 8546 of the New Customs Tariff (after 1-3-1988) and under Tariff Entry 7014 under the New Customs Tariff up to 28-2-1988. Under the Old Customs Tariff, however, there is no express entry dealing with electrical insulators equivalent to Entry 8546.00 of the New Customs Tariff. Entry....
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....R Ex 122, Cameron J. observed that it is not botanist's conception as to what constitutes a fruit or vegetable....but rather what would ordinarily in matters of commerce in Canada be included there should be the guide. Similarly, this Court has held in Union of India V. Delhi Cloth and General Mills Co. Ltd., AIR 1963 SC 791 at page 79 para 12 that the view of the Indian Standard Institute as regards what is refined oil as known to the market in India must be preferred in the absence of any other reliable evidence. It must be emphasised in view of the arguments advanced in this case that the meaning should be as understood in the particular trade. In this case, we are construing not paper as such but a particular brand of paper with a meaning attributed to it. Sub item (2) of item 17 as was the position in 1976 paper referred to all kinds of paper including paper or paper boards which have been subjected to various treatments such as coating, impregnating. So, therefore, if all kinds of paper including coated paper is the goods, we have to find out the meaning attributed to those goods in the trade of those kinds of paper where transactions of those goods take place. 18. In th....
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....y giving due weight and effect to the meaning conveyed by the words "all articles made of plastics .....". Therefore, we are of the view that the approach of the revising authority as well as of the Tribunal in applying entry No. 78 was not proper. Further, if there is any doubt as to which entry a particular article would fall, the benefit of doubt should be extended to the assessee in view of the well-established principle governing the interpretation of a taxing statute." 26. In the case of Business Forms Ltd. Vs. Commissioner of Commercial Taxes reported in STC V.59 page 86, this Court has held as under: "8. We may, at the outset, state that the classification of the said goods for the purpose of levy under the Central Excise Act, furnishes no guidance for determining the rate of levy under the State Sales Tax Act. We have to examine the meaning of the paper as understood in common parlance. Entry 125 of the Second Schedule appears to be comprehensive in terms. It takes within its fold "all kinds of paper", excluding those specifically set out therein. Those which are excluded are only the items mentioned under serial No. 55 and no other." 27. The Supreme Court in the case o....
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....ed in STC V.42 Page 433, has held as under: "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 meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the Legislature. The reason is that as pointed out by Story, J., in 200 Chests of Tea, the Legislature does "not suppose our merchants to be naturalists, or geologists, or botanists". But here the word "textiles" is not sought by the assessee to be given a scientific or technical meaning in preference to its popular meaning. It has only one meaning. namely, a woven fabric and that is the meaning which it bears in ordinary parlance. It is true that our minds are conditioned by old and antiquated notions of what are textiles and, therefore, it may sound a little strange to regard "dryer felts" as "textiles" But it must be remembered that the conce....
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....assification to avoid controversy over the residuary clause. As a matter of fact in: the Red Book (Import Trade Control Policy of the Ministry of Commerce) under item 150, in section II, which relates to "rubber, raw and gutta percha, raw", synthetic latex including vinyl pyridine latex and copolymer of styrene butadiene latex are specifically included under the sub-head "Synthetic Rubber". We do not see any reason why the same policy could not have been followed in the I.C.T. book being complementary to each other. When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the percentage and consign it to an orphanage of the residuary clause. The question of competition between two rival classifications will, however, stand on a different footing." 32. The Supreme Court in the case of State of U.P. and Another Vs. Kores (India) Ltd. reported in STC V.39 Page 8, has held as under: "It is well-settled that a word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occu....
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....e Legislature. Where, however, there is no evidence either way then, the definition given and the meaning following from particular statute at particular time would be the decisive test. It was said by Holmes, J., in his inimitable style that, "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." 34. The Indian Standard Glossary of Terms used in Paper Trade and Industry gives the meaning of the Electrical Insulating Paper or Board at IS 4661:1999 Page 69, reads as under: "Electrical Insulating Paper or Board: Paper or board having certain properties, namely, high electrical strength, durability, absence of conductive metallic particles and uniformity in thickness and formation. Such material is being used by the electrical industry for insulation." 35. Chapter 1 - Preliminary of The Bureau of Indian Standards Act, 1986 is an Act to provide for the establishment of a Bureau for the harmonious development of the activities of standardization, marking and quality certification of goods and for matters connected therewith or incidental theret....
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....actors which have to be taken into consideration for determining the classification of a product. For the purposes of classification, the relevant factors, inter alia are, statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to, the end use to which the product is put to, cannot determine the classification of that product. It is well-established that in a taxing statute, there is no room for any intendment and regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the enactment. If the tax-payer is within the plain terms of the exemption, he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the enactment or by necessary implication there from, the matter is different. The normal function of the word 'including' in an entry, is to indicate that the items following the word "including" are those of the types of the main item in the entry. There could be some doubt as to whether the main entry....
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....to see whether that product is included in the word 'paper'. 39. Keeping in mind these principles, if we look at the item, which is in dispute, it is called as Electrical Insulated Press Board, which is commonly known as High Density Board. In the aforesaid description, the word 'paper' do not find a place. If we go by the Indian Standard Glossary Terms used in Paper Trade and Industry, the said Electrical Insulated Press Board is described as 'having certain properties, namely, high electrical strength, durability, absence of conductive metallic particles and uniformity in thickness and formation. Such material is being used by the electrical industry for insulation'. Therefore, it is clear that the said goods is excessively used in an electrical industry and not used in common parlance for the purpose of writing, printing, packing, drawing, decorating or covering walls. 40. When we look at the process of manufacture of this item, which is extracted above, indicates that this product is manufactured by imported wood pulp. It is tested for fiber length, moisture content, mechanical and chemical properties. The petitioner imports sulphate pulp. The imported....