Commissioner Of Trade Tax, U.P vs M/S. Kartos International Etc

Commissioner of Trade Tax, U.P. .... Appellant

Versus

M/s. Kartos International Etc. .... Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. The present appeals are filed against the impugned

judgment and order dated 25.5.2009 in TTR No.

329/2007 & TTR No. 330/2007 & TTR No. 331/2007

& TTR No. 332/2007 & TTR No. 333/2007 & TTR No.

334/2007 passed by the High Court whereby the High

Court allowed the Trade Tax Revision filed by the

respondent and reversed the order passed by the Trade

Tax Tribunal, UP (Noida Bench).

2 3. The issue that falls for our consideration in the present

appeals is whether scientific and biological

instruments/equipments manufactured and sold by

the respondent/assessee would be entitled to get

exemption from payment of tax under the UP Trade

Tax Act, 1948 (for short "the UP Act") as well as the

Central Sales Tax Act, 1956 (for short "the Central

Act") in view of the notifications No. 1166 dated

10.4.2000. The aforesaid issue was the only issue

which was decided by the Tribunal in favour of the

respondent - assessee and therefore in this appeal we

are required to answer and decide the said issue,

which is framed by us.

4. In order to answer the aforesaid issue which arises for

our consideration, it would be necessary to set out

some facts leading to filing of the present appeals.

5. The assessee/respondent is a proprietorship firm,

which is engaged in the manufacture and sales of

various "scientific and biological

equipments/instruments, which are used mainly by

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biological scientists for research purposes for which

the assessee is duly registered under the provisions of

U.P. Act as well as the Central Act. The

assessee/respondent was issued a notice by the

assessing authority and the assessee appeared before

the assessing authority and claimed that the goods

sold by it are exempted from tax in view of the

notification no. 1166 dated 10.4.2000 and also claimed

relief on account of Inter-State sales made to various

government organisations and institutions against the

Forms 3D and D.

6. The Assessing Authority, after examining the accounts

and details, issued a show cause notice to the assessee

proposing to make the best judgment assessment on

the basis of an inference that the assessee had effected

sales at concessional rate of tax to various

organizations against the declaration of form 3D and

form D even though the said organizations were not

the Government organisations and no benefits of

concessional rate of tax could have been claimed by

the assessee. The assessing authority further took a

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view that the goods sold by the assessee are not

covered by the notification No. 1166 dated 10.4.2000

and hence the goods of the assessee were liable to be

taxed at the rate of 10% as unclassified goods.

7. The assessee replied to the show cause notice and

stated that the goods sold by the assessee are fully

covered by the notification no. 1166 dated 10.4.2000

and that the assessee had charged and deposited tax

at concessional rate on the Intra-State sales as well as

Inter-State sales made to various Government

Organizations and institutions but claimed that it was

exempted under the said notification also.

8. The explanation as submitted by the assessee was not

accepted by the assessing authority and assessment

orders were passed on 20.2.2004, 17.3.2005 and

30.3.2005 for the Assessment Year 2001-2002, 2002-

2003 and 1998-1999 respectively and the tax was

levied under the UP Act and also under the Central

Act. The Assessing Authority has accepted books of

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accounts of the assessee as well as declared turnover

but rejected the benefits of declaration Form 3-D/D

and on the Intra-State/ inter-state sales made to the

Central/ State Government organizations and also

treated the goods as unclassified goods, declining it to

grant benefit of exemption under notification no.1166

dated 10.4.2000 holding that the assessee is not

entitled to get exemption under the aforesaid

notification.

9. Thereafter, appeals were filed before the Joint

Commissioner (Appeals) and by its common order

dated 31.12.2005, the Joint Commissioner (Appeals)

dismissed both the appeals holding that the equipment

manufactured and sold by the respondent are used as

instruments in the research laboratories for

maintaining the environment free from bacteria, and

therefore, the respondents are not entitled to claim

exemption.

10. The Assessee/Respondent filed appeals before the

Trade Tax Tribunal, UP (Noida Bench) and the

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Tribunal by an order dated 21.2.2007 dismissed the

appeals filed by the assessee/respondent holding that

only such articles are exempted from tax which are

used for educating children such as maps, charts,

instrumental box, educational globe, biology

instruments, and not those used for research

purposes.

11. Thereafter, a Trade Tax Revision under Section 11 of

the Trade Tax Act, 1948 was filed by the Respondent

before the High Court of Allahabad and the High Court

by its impugned judgment and order upheld the

contention of the assessee/respondent and held that

the assessee is entitled to the benefit of notification No.

1166 dated 10.4.2000 holding that the description of

the goods made in the notification has been clarified to

be used by all the persons. While coming to such

conclusions, reference was also made to the Hindi

version of the notification dated 10.4.2000 holding that

the same makes it clear that the exemption has been

granted to the instrument which has been used.

7 12. The aforesaid findings and conclusions arrived at by

the High Court are under challenge in these appeals

on which we heard the learned counsel appearing for

the parties.

13. Learned counsel appearing for the appellant submitted

that the words "biology instruments" necessarily mean

the instruments, which are used by the students in

educational institutions, more particularly, in schools

and colleges and not in research institutions. It was

also submitted that each word of the notification must

be distinctly read to take colour from the preceding

words by applying the principle of ejusdem generis.

Next submission was that the equipments

manufactured by the assessee could not be clubbed

with other items as mentioned in the notification as

the goods manufactured by the assessee are not

similar or identical as that of the goods mentioned in

the notification. It was also contended that the words

"biology" instruments and apparatus are confined to

the items used in the study of science of physical life

in respect of plants and animals in school and colleges

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but the goods in question supplied by the respondent

are used in laboratories and research institute.

14. It was further submitted that the assessee himself

never treated the goods in question as "exempted

goods" but treated them as "taxable goods" under

Section 3-A(1)(C) of the U.P. Act as unclassified goods

and the assessee charged full rate of tax as is evident

from the various cash memos, which are on record and

also claimed concessional rate of tax against the Form

3D (U.P. Act) and Form D (Central Act).

15. It was further submitted that the plain language of the

notification is to be read for the purpose of

understanding its language and the common parlance

meaning or the popular sense meaning should be

preferred over the technical or scientific meaning of the

items and since the goods manufactured by the

assessee are not being used for the study of biology,

the same is not entitled for exemption from tax.

Reliance was also placed by the counsel for the

appellant on the Hindi version of the notification,

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which classifies it as relatable to life science (Jeev

Biology) taught in schools and colleges.

16. Learned counsel appearing for the respondent,

however, refuted the aforesaid contentions of the

appellant and submitted that the equipments and

instruments which are being manufactured by the

assessee/respondent are mainly used for providing a

safe environment for scientific experiments and

research work and also they are used for the safety of

scientists who are engaged in micro-biological

research, diagnostic laboratories, hospitals and

operation theatres. According to the counsel these

equipments are used by persons, who undertake

research work on high risk diseases like T.B, Hepatitis

B, who are prone to get it and are at a higher risk of

being infected by agents/ bacteria which they handle

and therefore, the surroundings where such research

work is being undertaken requires to be made free

from contamination to prevent, reduce or eliminate the

risk of spread of infectious disease. He urged that the

main purpose of these equipments is to provide

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bacteria/dust free i.e bio-clean environment in the

working chamber to prevent the risk of infections and

the same are entitled for exemption.

17. It was further submitted that the word "biology" and

"biological" are not different from each other and are

interchangeable.

18. It was also submitted on behalf of the respondent that

the entry also contains the word "maps" and "survey

instruments and apparatus". The maps are used by

the school students alone, however, these apparatus

are also used by the numerous people including

geologists. It was contended that the notification does

not only include the word biology instruments and

apparatus, but also includes scientific instruments.

19. On the basis of the submissions made by the learned

counsel appearing for the parties, we have perused the

records.

20. The fact that the assessee himself never treated the

goods as exempted goods and treated them as taxable

goods under Section 3-A(1)(C) of the U.P Act as

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unclassified goods and charged full rate of tax makes

it clear that even the assessee was aware of the fact

that the goods does not fall within ambit of the

notification dated 10.4.2000.

21. The other issue that came for consideration is whether

there is a difference between the term "Biology

Instruments" and "Biological Instruments". The term

"Biology Instruments" refers to those instruments

which are used in the education of Biology as a

subject in the educational institutions. But the words

"Biological Instruments" should be interpreted in a

broader sense, and it includes various articles which

are supplied to hospitals and medical colleges for

various purposes including research.

22. The Hindi version of the Notification dated 10.4.2000

is "Jeev Vigyan Sammandhi Upkaranikayen Aur

Sanyantra". That means the instruments which are

used for the study of Life Science (Jeev Vigyan) by

students in educational institutions. The various

articles in question as manufactured and sold by the

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respondent are not meant for teaching Life Science

(Jeev Vigyan) to be taught in educational institutions.

The articles in question are meant for Hospital,

Medical Colleges and Research Laboratories which

may fall in the category of "Biological Instruments" and

are outside the purview of "Biology Instruments" to be

used by the students in educational institutions.

23. Moreover, classification of any commodity cannot be

made on its scientific and technical meaning. It is only

the common parlance meaning of the term which

should be taken into consideration for the purpose of

determining the tax liability. In the present case the

commodities that have been grouped together are

articles used in Education Institutions such as Maps

Chart, Sketch Map, Instrument Box, Educational

Globes etc.

24. This Court in the case of Maharashtra University of

Health Sciences Vs. Satchikitsa Prasarak Mandal

reported in (2010) 3 SCC 786 held as follows:-

13 "27. The Latin expression "ejusdem generis"

which means "of the same kind or nature" is a principle of construction, meaning thereby when general words in a statutory text are flanked by restricted words, the meaning of the general words are taken to be restricted by implication with the meaning of the restricted words. This is a principle which arises "from the linguistic implication by which words having literally a wide meaning (when taken in isolation) are treated as reduced in scope by the verbal context". It may be regarded as an instance of ellipsis, or reliance on implication. This principle is presumed to apply unless there is some contrary indication [see Glanville Williams, The Origins and Logical Implications of the Ejusdem Generis Rule, 7 Conv (NS) 119].

34. It is also one of the cardinal canons of construction that no statute can be interpreted in such a way as to render a part of it otiose. It is, therefore, clear where there is a different legislative intent, as in this case, the principle of ejusdem generis cannot be applied to make a part of the definition completely redundant."

25. This Court in the case of Ramavatar Budhaiprasad v.

Asstt. STO reported in AIR 1961 SC 1325 stated

technical meaning of a commodity cannot be a basis

for adjudicating the classification and held as follows

"3. .......Reliance was placed on the dictionary meaning of the word "vegetable" as given in Shorter Oxford Dictionary where the word is defined as "of or pertaining to, comprised or consisting of, or derived, or obtained from plants or their parts". But this word must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning "that sense which people conversant with the subject- matter with which the statute is dealing would attribute to it". It is to be construed as understood in common language; Craies on Statute Law, p. 153 (5th Edn.). It was so held in

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Planters Nut Chocolate Co. Ltd. v. The King 1. This interpretation was accepted by the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants' Association, Santra Market, Nagpur v. The State of Madhya Pradesh (Sales Tax Department) 2 where it was observed:

"In our opinion, the word `vegetables' cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term `vegetables' is to be understood as commonly understood denoting those `classes of vegetable matter which are grown in kitchen gardens and are used for the table.'"

(emphasis supplied)

26. In Hansraj Gordhandas Vs. H.H. Dave, Asst.

Collector of Central Excise and Customs reported in

AIR 1970 SC 755, this Court held as follows:-

"It is well established that in a taxing statute

there is no room for any intendment but regard

must be had to the clear meaning of the words.

The entire matter is governed wholly by the

language of the notificatlon. 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 & Co. 1:

"Intention of the legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to enact it. In a Court of Law or Equity, what the Legislature intended

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to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication."

27. It would also be relevant to mention here that there is

a vast difference between Biology Instruments and

Biological Instruments. The term Biology Instrument

refers to a limited range of instruments confined for

their use in study of Jeev Vigyan only. The word

Biological Instrument is a general word with its utility

where wide scale applications including the goods as

manufactured by the assessee/respondent are taken.

In the Government Notification dated 10.4.2000, the

words Biology Instruments have been referred. This

means that only such articles as meant for education

institution for the study of Jeev Vigyan such as Maps

Chart, Instrument Boxes, etc., are included in the

notification in question. Biological Instruments are

outside the ambit of the said Notification. The term

"Biological Instruments" is the most general term,

which comprises of goods manufactured and sold by

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the respondent. But such goods are certainly not

Biology goods.

28. In the light of the aforesaid decisions of this Court we

must analyse as to whether or not the principles of

Nositur a Sociis or the principle of ejusdem generis

could be said to be applicable on the facts of the

present case.

29. Nositur a Sociis means that when two words are

capable of being analogously defined, then they take

colour from each other. The term ejusdem generis is a

facet of Nositur a Sociis. The aforesaid principle means

that the general words following certain specific words

would take colour from the specific words.

30. The counsel appearing for the appellant submitted that

the aforesaid principles, particularly, the principle of

Nositur a Sociis would be applicable to the facts of the

present case. The counsel appearing for the

respondent, however, submitted that the aforesaid

principle would have no application to the facts of the

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present case as the words in the entry do not represent

a homogenous class as maps, educational charts,

scientific mathematical survey, mechanical drawing

and biology instruments and apparatus, all belong to

different categories of goods and they are not followed

by any general words.

31. We are unable to accept the aforesaid stand of the

counsel appearing for the respondents for all these

goods which are mentioned in the aforesaid entry of

the notification relate to articles used for study of life

science in schools and colleges, such as, maps,

educational charts, scientific mathematical survey,

mechanical drawing and biology instruments and

apparatus. All of them belong to one class as they are

the tools by using which a student would and could

learn life science. In the aforesaid manner the doctrine

of Nositur a Sociis would be applicable to the facts of

the present case.

32. At this stage reference could also be made to the

earlier entry on the same subject which was used in

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the notification dated 20.05.1976. In the said

notification the entry was in the following manner:

"Maps, Educational Charts, Instruments Boxes,

Educational Globes and instruments, such as

instruments used in Mechanical drawings and

Biology used by Students."

33. The aforesaid entry came to be amended subsequently

and the entry vide notification dated 10.04.2000 was

inserted granting exemption to the sales of Maps,

Educational Charts, Instruments Boxes, Educational

Globes and Scientific Mathematical Survey,

Mechanical Drawings and Biology instruments and

apparatus. All these items are used by the students

studying in schools and colleges.

34. The respondent on the other hand manufacture and

sell the articles, such as, Bilogical Safety Cabinets;

Laminar Flow Cabinets; Fume Hoods; Air Showers;

Operation Theatre Modules; Air Curtains; Air

Conditioner Modules; Clean Tents; Clean Room

Garments; Pass Boxes; Air Handling, Filter etc. These

articles are manufactured and sold by the respondent

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to Hospitals, Medical Colleges, Advance Research

Institutions and Laboratories.

35. A glance at the aforesaid items would establish that

what is exempted under notification dated 10.04.2000

are basic items to learn the Life Science and which are

instruments and apparatus for learning Biology and

other Life Science. Therefore, on applicability of the

aforesaid doctrine and also on considering the

intention of the Government for issuing the aforesaid

notification granting exemption for learning Life

Science it is established that no exemption was desired

for the articles manufactured and sold by the

respondent but it was meant exclusively for articles

used by the students of schools and colleges. The

exclusion of the word students in the subsequent

notification would not in any manner materially

change the intention for which such notification is

issued.

20 36. This Court in the case of M/S Pradeep Agarbatties V.

State of Punjab and Others 1997 8 SCC 511, held

that: -

"Entries in the Schedule of sales tax and

Excise Statues list some articles separately

and some articles are grouped together, when

they are grouped together each word in the

entry draws colour from the other words,

therein. This is the principle of NOSITUR A

SOCIIS."

37. In the present case, the goods manufactured and sold

by the assessee are not meant for Educational

Institutions but are meant for Research Laboratories.

Hence the commodities in question are not covered by

the said notification dated 10.4.2000, and are not

entitled for exemption.

38. In view of the aforesaid discussion and law laid down

by the Supreme Court in earlier decisions, we are of

the considered opinion that the appeals deserve to be

allowed. Accordingly, the appeals are allowed. The

order passed by the High Court is set aside and the

order of the Tribunal is restored.

21 ..........................................J

[Dr. Mukundakam Sharma ]

............................................J

[ Anil R. Dave ]

New Delhi,

April 6, 2011