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THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, (ENFORCEMENT) -1, THE COMMISSIONER OF COMMERCIAL TAXES AND STATE OF KARNATAKA Versus M/s. H.H. CEMENT PRODUCTS And M/s. PEECI INDUSTRIES

2016 (3) TMI 1094 - KARNATAKA HIGH COURT

Classification - Rate of tax on paving bricks/blocks - 4% or 12.5% - distinction between bricks and paving bricks/ blocks - the first appellant issued show cause notices proposing to levy VAT at 12.5% on paving bricks/blocks treating them as falling outside entry No.2 of Schedule III. - KVAT - Revenue submitted that, Entry No.2 of Schedule III is clear in its language to include bricks and only bricks stipulated therein which are used for construction of a building and it cannot include paving b .....

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ruction would use of the bricks for the purpose of construction of a building. Therefore, the common meaning of bricks is that which could be used for construction purposes with the help of cement and sand for outer finishing and also for aligning of bricks. If one thinks, of bricks, at the first instance, country made bricks made out of clay would come within such category but the Legislature intended to include refractory bricks, fly ash bricks in addition to country made bricks. Therefore, it .....

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or item is marketed as bricks, it is for the purpose of construction and in common parlance bricks are used for construction and all such bricks used for construction can be said to be included. - The attempt on the part of learned counsel for the respondent / assessee to contend that laying the flooring in a compound or in the garden is also a part of construction activity cannot be accepted for the reason that if such a wide meaning is given to the word “construction” it would result in an .....

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rface of the earth. If the aforesaid aspects are considered, it is not possible to accept the contention of learned counsel for the respondents that the construction should include flooring in the compound or flooring in the garden as sought be canvassed. - In view of the examination of the matter by distinguishing between bricks and the floor bricks or pavers we cannot agree with the view taken by the Gujarat Tribunal as well as Karnataka Appellate Tribunal. Hence, we find that the said vie .....

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passed by the learned single Judge of this Court in the respective writ petitions whereby the learned Single Judge for reasons recorded in the order has allowed the writ petitions. 3. The brief facts of the cases are that on 01/04/2005 the Karnataka Value Added Tax Act (hereinafter referred to as The KVAT Act ) has come into force and as per the said Act, there was specific Entry No.2 of Schedule III which provided as under:- All kinds of bricks including fly ash brick; refractory bricks and the .....

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ooks of accounts such as sale invoices and purchase invoices etc., for the assessment periods of 2005-06, 2009-10. The respondent submitted reply stating that they have already produced the books of accounts for the respective assessment years before the DCCT (Audit) and as the books are taken up for the audit by the DCCT (Audit) for verification under Section 39(1), there was no need for the first appellant to interfere with the jurisdiction of the Deputy Commissioner. 5. However, on 26/03/2010 .....

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d therefore instead of relegating the respondents herein to the alternative remedy found that the matter may be permitted to be agitated under Article 226 of the Constitution and ultimately set aside the order for recovery of VAT passed on the clarification issued by the second appellant herein and further declared that the clarification issued by the second appellant herein would not be applicable to tiles which are in the form of paving bricks and they are covered by the exhaustive definition .....

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in its language to include bricks and only bricks stipulated therein which are used for construction of a building and it cannot include paving bricks since the normal use of paving bricks is mainly for flooring in the compound, garden etc, and not for construction of a building. Learned Additional Government Advocate mainly relied upon the decision of this Court in the case of Raman Boards Limited vs. State of Karnataka [(2015) 80 VST 502] to support his contention regarding interpretation of .....

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to the word brick . It should take into consideration advancement of science and technology in manufacturing various types of bricks. In her submission, paving bricks/blocks are also a type of brick and when the Legislature has used the expression all kinds of bricks and further, the definition is inclusive, it should be expansively read so as to include paving bricks/blocks also. She submitted that she wished to rely upon certain examples where paving bricks/blocks are used for construction of .....

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oofing sheet or earthen tiles would not have been included. Keeping in view the said aspects, learned counsel for the respondents has supported the view taken in the impugned order. She has also relied upon various decisions in support of her contentions, which we would be referring to in the latter part of the judgment to the extent they are applicable. 9. As Entry 2 of Schedule III is already reproduced, we need not repeat the same. Before we address on the question of interpretation of the pr .....

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g statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of inte .....

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e considered and if there is no clear identity or there is no clarity on the said aspect, the Court may consider the composition of the product used or other dictionary meaning etc. When the product is well known and understood amongst the buyers in commercial parlance, the other test namely, its composition or its actual use by different persons who may be using it for various purposes or its dictionary meaning would have little role to play. At this stage, we may refer to the decision of this .....

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fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand by them in the usual course. If an expression is capable of a wider meaning as well as narrower meaning the question whether the wider or the narrower meaning should be given depends on the context and the background of the case. But once article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests of .....

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in another enactment. It is well settled rule of construction that the words used in a statute imposing the tax, may be construed in the same way in which they are understood in ordinary parlance in the area in which the law is in force. (emphasis supplied) We may also refer to the decision of the Apex Court upon which reliance is placed by learned counsel appearing for the respondents in the case of Trutuf Safety Glass Industries vs. Commissioner of Sales Tax, U.P. [(2007) 7 SCC 242] wherein t .....

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at while interpreting the words glass and glass wares in the entry, it should be interpreted as it is understood by the persons dealing in them. It held that the articles manufactured by the assessee cannot be described as glass or glass wares. The view of the High Court would have been correct had the expression in all forms not succeeded the expression glass and glass wares. x x x 11. The golden rule for construing wills, statutes, and, in fact, all written instruments has been thus stated: Th .....

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unambiguous in our judgment, we are bound to construe them in their ordinary sense, even though it lead, in our view of the case, to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure. But we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning (See Abley V.Dale 11, C.B.3 .....

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such as All kinds of bricks found in of Entry No.2 of Third Schedule, we could rely on what has been stated by Justice G.P.Singh in his celebrated work, Principles of Statutory Interpretation. 13th Edition. The cardinal rule is that general words in the statute must be given a general construction, unless there is something in the Act itself, such as subject matter with which the Act is dealing or context in which such words are used, to show the intention of the Legislature, that they must be g .....

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ha [AIR 1958 SC 341, P.348], general words and phrases, however wide and comprehensive they may be in their literal sense must usually be construed as being limited to the actual object . According to Privy Council one of the safest guides to the construction of the sweeping general words which it is difficult to apply in their full literal sense is, to examine other words of like import in the same instrument and to see what limitations can be placed on them . General words also receive a restr .....

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erstood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general - Maxwell on Interpretation of Statues , 12th Edition Page 321. 12. In the case of State of Bombay vs.Hospital Mazdoor Sabha [AIR 1960 SC 610], it has been observed that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with. By way of caution it is noted that noscitur a sociis .....

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a wide meaning to the word bricks to include every kind of brick, yet the expression must take its colour from the other words used in the entry such as and the like . 13. Several decisions could be adverted to at this stage: (i) In M/s.Parakh Foods Ltd. vs. State of A.P [AIR 2008 SC 2012], the expression such other used in Rule 37-D of prevention of Food Adulteration Rules, 1955 came up for consideration and it was held that the said expression had to be read with the subject matter in which th .....

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the Hon ble Supreme Court in the case of Godfrey Philips India Ltd. vs. State of Utter Pradesh [(2005) 2 SCC 515]. In that case, what came up for consideration was Entry 62 of List II, which relates to the exclusive power of the State Legislature to make laws with reference to the taxes on luxuries, including taxes on entertainments, amusements, betting and gambling . Quoting Maxwell on Interpretation of Statutes , with regard to the effect of words, and particularly general words, it was held t .....

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d in the case of Rainbow Steels Ltd. vs. CST [(1981) 2 SCC 141] was applied in the matter. (iii) In Rainbow Steels Ltd., the expression old occurring in Entry 15 of schedule to the notification dated May 30, 1975, issued under the provisions of the Uttar Pradesh Sales Tax Act, 1948 came for interpretation. The said entry 15 reads as follows: Old, discarded, unserviceable or obsolete machinery, stores or vehicles, including waste products, except cinder, coal ash and such items as are included in .....

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960 SC 1080]. The rule which is known as rule of ejusdem generis applies when; (i) the statute contains an enumeration of specified words; ii) the subject of the enumeration constitute a class or category; iii) that class or category is not exhausted by the enumeration ; iv) the general terms follow the enumeration; v) there is no indication of different legislative intent. In the instant case, the general words. All kinds of Bricks precede the specified words. (v) In Commissioner of Income Tax, .....

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unconventional raw materials were entitled to concessional rate of tax prescribed by the Notification No.25/1984. Those two types of papers fell under category printing and writing paper and those two articles also fell under the description coated paper used in the second proviso to the notification. It was held that the only reasonable way of interpreting the expression coated paper was in a narrower sense consistent with the other expressions used in the second proviso to the notification. T .....

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d to things of the same kind as those specified. It was further held that the rule restricts an attempt to reconcile incompatibility between the specific and general words in view of the other rules of interpretation that all words in a statute are given effect if possible; that a statute is to be construed as a whole and that no words in a statute are presumed to be superfluous. It was further held that for invoking the application of the ejusdem generis rule, there must be a distinct genus or .....

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ick is one used for construction purposes. One who is involved in the business of construction or who is desirous to put up construction would use of the bricks for the purpose of construction of a building. Therefore, the common meaning of bricks is that which could be used for construction purposes with the help of cement and sand for outer finishing and also for aligning of bricks. If one thinks, of bricks, at the first instance, country made bricks made out of clay would come within such cat .....

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t the general use of bricks is for constructions of various types of building. Under the circumstances, if the product or item is marketed as bricks, it is for the purpose of construction and in common parlance bricks are used for construction and all such bricks used for construction can be said to be included. 15. The attempt on the part of learned counsel for the respondent to contend that laying the flooring in a compound or in the garden is also a part of construction activity cannot be acc .....

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de construction on the level of the earth or on the surface of the earth and not raised above the surface of the earth. If the aforesaid aspects are considered, it is not possible to accept the contention of learned counsel for the respondents that the construction should include flooring in the compound or flooring in the garden as sought be canvassed. 16. The attempt made by learned counsel for the respondents to contend that paving bricks/blocks are also used for construction of compound wall .....

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7. The aforesaid reason is in addition to the basic features of paving bricks such as the method of manufacturing of paving bricks/blocks as compared to normal bricks. Paving bricks invariably would contain an interlocking system as it is used for flooring. In normal circumstances cement is not required to be used for combining one block with another. No cement is required for flooring the paving blocks. Paving bricks/blocks can be fixed on any surface interlocking each other whereas bricks whic .....

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cks are concerned more particularly fly ash bricks and paving bricks are the same. As such, there is no material available in support of such a proposition. Even if we consider the contention for the sake of examination, the strength of fly ash bricks and paving blocks is different because of difference in the proposition or quantity of cement or other materials used in paving bricks in comparison with fly ash bricks. It is true that the composition of the product would have little role to play, .....

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nsel for the respondents in the case of State of Maharashtra vs. Bradma of India Limited [2005(2) SCC 669], the question considered by the Apex Court was when the specific entry is available, whether the residuary entry could be resorted to. The principles laid down by the Apex Court in the said decision, even if applied to the facts of the present case, would be of no assistance to the respondents because if it is found that paving bricks/blocks are included in Entry 2 of Schedule III naturally .....

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ll kinds of bricks a wider meaning should be given to the word bricks , cannot be countenanced for the simple reason that the said expression is followed by the words the like . Hence, the said decision is of no help to the respondents. 21. In the case of Trutuf Saftey Glass Industries (supra) the Apex Court did observe that for the purpose of interpretation of an entry, recourse should not be made to the scientific meaning of the terms or expressions used but to its popular meaning, that is to .....

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rved earlier by us, the specific word in the Entry such as the like , goes to show that bricks should have the same characteristics as that of country made bricks or refractory bricks. Therefore, we do not find that the said decision would be of any help to the respondents. 23. In the decision of this Court in the case of State of Karnataka vs. Kasturi and sons [ILR (Kar) 2000 page 2995], question arose regarding of an interpreting Entry when it read as Paper of all kinds and this Court found th .....

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