TMI Blog2009 (12) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... e same term continues to be in use in the amendment notification cannot also be accepted. Though such an argument is attractive, it does not stand to legal scrutiny in the light of the judgment of the Supreme Court in Sales Tax Officer, Sector IX, Kanpur v. Darling Dairy Products [1994 (5) TMI 213 - SUPREME COURT OF INDIA] What applies to surcharge is also applicable to resale tax. Further, once legal issues are settled regarding the separate tax for SKO/white kerosene under a different entry in the Eleventh Schedule, the dealers are bound to pay the said rate of levy of tax and also surcharge and resale tax, which are also applicable notwithstanding the so-called exemption under section 17(1). Appeal dismissed. - W.P. Nos. 422,423 of 2004 - - - Dated:- 23-12-2009 - CHANDRU K. , J. ORDER:- K. CHANDRU J. Preamble No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Tribunal, the matters stood transferred to this court and renumbered as writ petitions. The cases filed before the Madurai Bench of this court were also directed to be transferred by the order of the honourable the Chief Justice. Apart from the cases filed before the Tribunal, some cases were originally filed before this court also. Hence, all the matters were grouped together and came to be posted before this court by an order of the honourable the Chief Justice, dated November 30, 2009. These batch of writ petitions arise out of levy of sales tax on an higher percentage on superior kerosene oil (SKO) otherwise also called as white kerosene oil and levy of resale tax and surcharge on it. The charging section under the Tamil Nadu General Sales Tax Act, 1959 (for short, the TNGST Act ) for levy of tax is section 3(2C), which reads as follows: (2C) Subject to the provisions of sub-section (1), in the case of goods mentioned in the Eleventh Schedule, the tax under this Act shall be payable by a dealer at the rate and at the point specified therein on the turnover or quantity in each year relating to such goods. Section 3H provides for levy of resale tax, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the Schedule reads as follows: 2(iv) in item 10, for the expression 'kerosene' in column (2), the expression 'kerosene other than white kerosene (superior kerosene oil)' shall be substituted; . . . 2(vii) after item 17 and before Explanation I, the following item and entries shall be inserted, namely: '18 White kerosene (superior kerosene oil) First sale %'. By this separate entry in the Eleventh Schedule, kerosene is chargeable to tax at four per cent and the new entry white kerosene (SKO) at first sale is taxable at per cent. This amendment was made due to the policy decision taken by the State Government and also finds a place in the Budget Speech made on the floor of the Tamil Nadu Assembly (See for reference 130 STC Statute 26). Thereafter, by the Tamil Nadu Amendment Act 21 of 2003, the Schedule was amended wherein in Part DD, entry 10 and entry 18 read as follows: 10 Kerosene other than white kerosene (superior kerosene oil) First sale 4% . . . 18 Whit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 and II(1)/CT/ 40(b-4)/2002, Dated June 29, 2002 (with effect from July 1, 2002), respectively. 2.. From March 21, 2003, kerosene was specified by adding 'other than white kerosene (superior kerosene oil)'. 3.. Thus, the exclusion of white kerosene is only with effect from March 21, 2003. 4.. Up to March 20, 2003, white kerosene was deemed included in 'kerosene' and hence exempt from surcharge and resale tax. Hence, white kerosene is liable to surcharge and resale tax from March 21, 003. Therefore, it is contended that by virtue of the amendment, exemption from surcharge and resale tax if at all not available it is only made from March 21, 2003. The petitioners thus challenged the Amendment Act as well as notification under section 59(1), making separate entries of the goods as kerosene and SKO with two different tax rates as well as the direction to levy surcharge and resale tax with effect from March 21, 2003 was illegal. In one batch of cases, it was also contended that by G.O. Ms. No. 79, Commercial Taxes Department, dated June 27, 2002, by the exercise of power under section 17(1) of the TNGST Act, the State Government granted an exemption i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understood that SKO is only a part of kerosene. They did not make any distinction between kerosene and SKO as a different commodity. Therefore, that should be given credence. The Department cannot introduce any artificial definition of the term kerosene. The learned senior counsel placed a strong reliance upon the judgment of the Supreme Court in Arya Vaidya Pharmacy v. State of Tamil Nadu reported in [1989] 73 STC 346; [1989] 2 SCC 285. He relied upon the following passages found in pages 350 and 351, which reads as follows: We think that the appeals are entitled to succeed. Item No. 95 mentions the rate of seven per cent (now eight per cent) as the tax to be levied at the point of first sale in the State. Item No. 135 provides a rate of 30 per cent in respect of arishtams and asavas at the point of first sale. We see no reason why arishtams and asavas should be treated differently from the general class of ayurvedic medicines covered by item No. 95. It is open to the Legislature, or the State Government if it is authorised in that behalf by the Legislature, to select different rates of tax for different commodities. But where the commodities belong to the same class or ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the only conclusion to which we can come is that these preparations are medicinal preparations according to the standard ayurvedic text-books referred to already, though they are also capable of being used as ordinary alcoholic beverages. . . They cannot however be taxed under the various Excise Acts in force in the concerned States in view of their being medicinal preparations which are governed by the Act.' We are of opinion that similar considerations should apply to the appeals before us. The two preparations, arishtams and asavas, are medicinal preparations, and even though they contain a high alcohol content, so long as they continue to be identified as medicinal preparations they must be treated, for the purposes of the sales tax law, in like manner as medicinal preparations generally, including those containing a lower percentage of alcohol. On this ground alone the appellants are entitled to succeed. Applying the same ratio, the senior counsel wanted to state that the commodity kerosene whether it is ordinary kerosene or white kerosene makes no difference. Neither the authority can levy by notification under section 59(1) nor by amendment to Elev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... private marketing is permitted in kerosene in order to distinguish the kerosene available at the public distribution system, blue dye was used and to avoid pilferage and black marketing, the white kerosene was introduced for private marketing. Merely because there is colour distinction, the product does not get changed and it remains as kerosene only. The learned senior counsel, thereafter, relied upon the judgment of the Supreme Court in Associated Cement Companies Ltd. v. Government of Andhra Pradesh reported in [2006] 144 STC 342; [2006] 1 SCC 597 for the purpose of showing that in that case the Supreme Court distinguished Arya Vaidya Pharmacy case [1989] 73 STC 346; [1989] 2 SCC 285. When cement was levied tax at different rates that is on the sale price including value of packing materials and sale price not including the value of packing materials, the Supreme Court upheld the stand of the Revenue that there can be different tax rates on the same commodity to get over artificial billing by dealers. The Government's decision to levy two different taxes were held to be valid as they were based upon proper classification. In an another judgment, the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC); [1989] 2 SCC 285. In our view, this decision is factually distinguishable. In paragraph 9, this court observed that so far as the Assam Act is concerned, unlike the Tamil Nadu General Sales Tax Act, 1959, it identified the medicinal preparations containing more than 12 per cent alcohol as a separate class vis-a-vis such preparations either not containing alcohol or containing less than 12 per cent alcohol. The difference, according to this decision, distinguishes the basis of the judgment of this court in Arya Vaidya Pharmacy case [1989] 73 STC 346 (SC); [1989] 2 SCC 285 inasmuch as the Assam Act did not identify medicinal preparations containing more than 12 per cent alcohol as being the same as other medicinal preparations not containing alcohol. It was also noted in that decision that, on the other hand, these types of spirituous medicinal preparations, which contained 12 per cent alcohol, have been separately classified for the levy of tax under item 67 of the Schedule to the Act. In that view of the matter, the classification founded in the said decision with regard to the medicinal preparations based on the strength of alcohol contents in the same, cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Schedule. Our inquiry is limited to the question of locating the type of petrol covered under item 57B of the First Schedule. The term 'petrol' has been defined and ordinarily the same meaning must be given to that word wherever it appears unless the context demands otherwise. In the instant case, we find it difficult to agree with Mr. Iyer that in the context petrol in item 57B of the First Schedule must be understood to exclude substances which do not provide a reasonably efficient fuel for combustion engines. We are, therefore, of the opinion that the ultimate conclusion reached by the High Court that the brand of petrol having a flashing point below 24.4 degrees centigrade falls within item 57B in Schedule I is correct. After reaching that conclusion we find it difficult to appreciate why the High Court allowed the assessees' revision and remanded the cases to the Tribunal. Presumably the High Court overlooked the fact that it was admitted that the substances in question fell within the definition of 'petrol' under section 2(xvii). Once the High Court found that they fell within item 57B in the First Schedule the levy on these substances would be in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circle v. Thiagarajar Mills Ltd. reported in [2004] 134 STC 58 for the purpose of holding that the term product was not defined in the notification. Therefore, the cotton waste which is a by-product obtained in the process of manufacturing of yarn in the spinning mill is also a product within the meaning of notification granting deferral of sales tax on products manufactured by units. In paragraph 5, the division bench observed as follows: 5. The word 'product' has not been defined in G.O.P. No. 92. It only refers to the products manufactured by the new units established in the backward taluks to which the G.O. applies. The G.O. clearly recognises that the unit may manufacture more than one product. In the absence of any definition limiting the scope for the product only to the principal product, for the manufacturing of which the unit is established, the term 'product' is capable of comprehending within its by-product as well, especially when such by-products are themselves distinct commercial goods, which are capable of being marketed separately and which are also subjected to tax as an item of taxation. The learned senior counsel finally placed relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing system by use of suitable measures to be adopted by the Government oil companies as and when necessary. (emphasis Here italicised. added) It is pursuant to this direction that kerosene is sought to be coloured with appropriate chemical dyes. Therefore, colouring is done only to prevent black marketing and misuse. But, the character of the actual product, i.e., kerosene remains the same. Therefore, SKO should not be subjected to higher tax merely because it was included as a separate entry in the Eleventh Schedule. Mr. R. Senniappan, learned counsel for some of the petitioners, after adopting the arguments of other counsels attacked the impugned assessment orders that the authorities have relied upon the circular issued by the Principal Commissioner and did not take into account the objections of the dealers. He also submitted that they have mechanically demanded the amounts without specifying as to when the liability arose. He also placed reliance upon the decision of the Division Bench of this court in Tube Investments of India Limited v. Deputy Commercial Tax Officer, Group III, Enforcement I, Greams Road, Chennai reported in [2003] 129 STC 238 as well as the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel in this context placed reliance upon the judgment of the Supreme Court in Hansraj Gordhandas v. H.H. Dave, Asstt. Collector of Central Excise and Customs reported in [1969] 2 SCR 3; AIR 1970 SC 755. He stated that operation of notification has to be judged not by the object which the rule-making authority had in mind but by the words which it has employed to effectuate the legislative intent. It is well-established that in a taxing statute there is no room for any intendment. The entire matter is governed wholly by the language of the notification. If taxpayer 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. Therefore, the learned counsel submitted that exemption notification continues to mention the term kerosene without any corresponding modification. Therefore it should be understood as a commodity available on the date of notification and any subsequent change in the Schedule will not automatically modify the exemption notification. The learned counsel also placed reliance upon the judgment of the Supreme Court in Indian Aluminium Company Limited v. Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are not specifically mentioned they would be covered by reason of the words 'and others'. In the light of the same, the learned counsel submitted that merely because from the term kerosene, SKO is removed from the original entry and put as a separate entry in the Schedule, that will not correspondingly alter an exemption notification. In that view of the matter, he stated that at least in respect of surcharge, the dealers should be unburdened of their liability. The other counsels also submitted on similar analogy the resale tax was also liable for exemption. The respondents have filed a common counter-affidavit, dated June 7, 2007. In some of the cases, the taxing officers have also filed separate counter-affidavits wherever the State was not made as a party. It is stated by the State that when entry 18 of the Eleventh Schedule was inserted and the commodity white kerosene/SKO was notified taxable at per cent, the kerosene and SKO are separate and distinct commodities for the purpose of levying sales tax. Likewise, section 3H of the TNGST Act provides for levy of resale tax at the rate of one per cent where total turnover exceeds Rs. 10 lakhs per year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the Government has got power by delegated legislation to introduce an item into Schedule by virtue of section 59(1) and even that becomes a part of the statute. As to the effect of the entry into the Schedule came to be considered by the Supreme Court in Aphali Pharmaceuticals Ltd. v. State of Maharashtra reported in [1991] 81 STC 113; [1989] 4 SCC 378; AIR 1989 SC 2227. In paragraphs 31 and 32, the Supreme Court held as follows (at page 129 of 81 STC): 31. A Schedule in an Act of Parliament is a mere question of drafting. It is the legislative intent that is material. An Explanation to the Schedule amounts to an Explanation in the Act itself. As we read in Halsbury's Laws of England, Third Edn., Vol. 36, para 551: 'To simplify the presentation of statutes, it is the practice for their subjectmatter to be divided, where appropriate, between sections and Schedules, the former setting out matters of principle, and introducing the latter, and the latter containing all matters of detail. This is purely a matter of arrangement, and a Schedule is as much a part of the statute, and as much an enactment, as is the section by which it is introduced.' The Schedule m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; in section 3(1) of the Additional Duties Act must be read along with the entries in the Schedules. 63.. In Attorney-General v. Lamplough [1878] LR 3 EX D 214 at 229 (CA) it is observed: 'A Schedule in an Act is a mere question of drafting, a mere question of words. The Schedule is as much a part of the statute, and is as much an enactment, as any other part.' Maxwell says (in Interpretation of Statutes, 11th Edn., page 156): '. . . if an enactment in a Schedule contradicts an earlier clause it prevails against it.' Bennion (in Bennion's Statutory Interpretation, pages 568-569) referring to the place of Schedules in statutes observes: 'The Schedule is an extension of the section which induces it. Material is put into a Schedule because it is too lengthy or detailed to be conveniently accommodated in a section. . .' 'A Schedule must be attached to the body of the Act by words in one of the sections (known as inducing words). It was formerly the practice for the inducing words to say that the Schedule was to be construed and have effect as part of the Act. (See, e.g., Ballot Act, 1872, section 28). This is no longer done, being reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme incorporated in the Act and the power both under section 3A as also under section 4 is exercisable by the State Government only. When, after a notification under section 4 granting exemption from liability, a subsequent notification under section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State and the intention to levy the tax is clear we see no justification for not giving effect to the second notification. We would like to point out that the exemption was in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision it must be held that the exemption granted to ice-cream by notification dated May 21, 1974 was undone by the notification dated November 4, 1974 as well as by the notification dated May 30, 1975. The learned Special Government Pleader also submitted that a circular of the Commissioner issued under section 28A dated September 3, 2001 cannot go de hors the provisions of the Act. For this purpose, the counsel relied upon the judgment of the Supreme Court in Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47; [1994] Supp 1 SCC 310 and placed reliance upon the following passages found in paragraphs 17 and 18 of the said judgment, which read as follows (at page 56 of 90 STC): 17. . . Yet, it must be remembered that the said power can be exercised 'for giving effect to the provisions of the Act', and not in derogation thereof. . . 18.. So far as clarifications/circulars issued by the Central Government and/or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the courts. It is true that those clarifications and circulars were communicated to the concerned dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. The widest possible construction, according to the ordinary meaning of the words in the entry, must be put upon them. Reference to legislative practice may be admissible in reconciling two conflicting provisions in rival legislative Lists. In construing the words in a constitutional document conferring legislative power, the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. Similarly, the Supreme Court had an occasion to consider the question of tax imposed on sale of cooked food in posh hotels and restaurants and no such tax was imposed on sales in modest eating places. When allegations of discrimination was made, the same was repelled by the Supreme Court in Kerala Hotel Restaurant Association v. State of Kerala reported in [1990] 77 STC 3; [1990] 2 SCC 502. The Supreme Court repelled the contention that once there is common genus or species of product, the same is liable to tax of only on uniform percentage. On the contrary, even if the product is same, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are served at these different eating houses. This difference must also be available to support the difference in the incidence of the impugned sales tax. This classification does bear a rational nexus with the object sought to be achieved. The object clearly is to raise the needed revenue from this source, determined by the fiscal policy, which can be achieved by taxing sale of costly food alone and thereby placing the burden only on the affluent in the society. The classification is made by grouping together only those places where costly food is sold leaving out the comparatively modest ones. The classification is, therefore, founded on intelligible differentia and has a rational nexus with the object to be achieved. In the light of the above, the learned counsel submitted that the petitioners are not entitled for any indulgence. In the contrary, their contentions do not stand scrutiny of law and liable to be rejected. Considering the rival submissions of the parties, the following propositions of law emerge. An entry by virtue of section 59(1) made into the Schedule will stand in the same footing as entry by virtue of legislative amendment. The attack that a commodity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion notwithstanding the amendment to the entry in the Schedule because the same term continues to be in use in the amendment notification cannot also be accepted. Though such an argument is attractive, it does not stand to legal scrutiny in the light of the judgment of the Supreme Court in Sales Tax Officer, Sector IX, Kanpur v. Darling Dairy Products [1994] 94 STC 93; [1994] Supp 2 SCC 639. What applies to surcharge is also applicable to resale tax. Further, once legal issues are settled regarding the separate tax for SKO/white kerosene under a different entry in the Eleventh Schedule, the dealers are bound to pay the said rate of levy of tax and also surcharge and resale tax, which are also applicable notwithstanding the so-called exemption under section 17(1). The other issues raised by the individual petitioners, i.e., the attack against the assessment notices and demands, cannot be scrutinized by the court. In fact, such matters came to be admitted only because the challenge to the constitutionality of legislative entry into the Schedule is pending before the Tribunal or before the Taxation Appellate Tribunal or before this court. In some cases, there was also interim o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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