Super Diamond Tools v. The State Of Gujarat

1. This reference made by the Gujarat Sales Tax Tribunal (hereinafter called "the Tribunal") at the instance of the assessee under section 69 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Act"), raises the question of interpretation of the word ""rods"" in entry 27 of Schedule II-Part A of the Act. In order to appreciate the question which arises for determination, it would be necessary to set out a few facts.

2. The assessee is a firm holding registration certificate under the Act. It deals in goods or articles meant for use in the diamond industry. Amongst the goods or articles in which the assessee deals are included what are described by the assessee as copper bars or pieces of copper bars of nine-gauge size. These copper bars or pieces of copper bars, according to the assessee, are used as spare parts or accessories in the machinery used for polishing diamonds. The part of the machinery in which the aforesaid goods or articles are used is known as "angur" or "eyelet". The assessee sold certain quantity of the aforesaid goods or articles to two different parties under two separate bills each dated 21st September, 1972. On 23rd September, 1972, the assessee made an application to the Commissioner of Sales Tax to determine the rate of tax on the sales of goods or articles under the aforesaid two bills. Along with the said application the assessee enclosed the two bills in question. The application was heard by the Deputy Commissioner of Sales Tax. It was the case of the assessee before the Deputy Commissioner that the goods or articles were covered by entry 36 of the Government notification dated 29th April, 1970, issued under section 49 read with entry 16(1) of Schedule II-Part A of the Act inasmuch as they were spare parts or accessories of machinery used in the polishing of diamonds. Alternatively, the contention of the assessee was that the goods or articles were covered by entry 27 of Schedule II-Part A since they were wire "rods" manufactured out of copper, which is a non-ferrous metal, and that as such they were ""rods"" within the meaning of the said entry 27. Both these contentions were negatived by the Deputy Commissioner. So far as the contention based on entry 27 is concerned, the Deputy Commissioner held that the said entry specifically mentions bars and "rods" separately, although there is no substantial difference between the two and in commercial parlance both are considered as bars and that if the legislative intention was to include in the said entry wire "rods" in addition to "rods", wire "rods" would also have been specifically mentioned in the said entry. Be it noted, however, that the Deputy Commissioner failed to record a positive finding on the question of fact whether or not the goods or items sold under the two bills in question were, in fact, wire "rods". As regards the contention based on entry 36, we need not give the gist of the reasoning of the Deputy Commissioner because at this stage of the proceeding the case has not been rested on the said entry. The assessee, feeling aggrieved by the determination of the Deputy Commissioner, carried the matter in appeal before the Tribunal. The Tribunal also took the view that when the legislature has made a distinction between bar and rod in entry 27, wire "rods" could not be taken as covered by the term ""rods"". Be it noted that even the Tribunal, however, failed to consider the question whether the articles or goods which were sold by the assessee were in fact wire "rods". The result, therefore, was that the assessee's case that the articles or goods in question were covered, inter alia, by entry 27 was not found to be acceptable by both the authorities, which found that entry 13 of Schedule III governed the sales in question.

3. At the instance of the assessee, the Tribunal has referred the following two questions to this Court for its decision :

"(1) Whether, on the facts and in the circumstances of the case, Tribunal was justified in holding that the articles sold under bills Nos. 835 and 836 dated 21st September, 1972, by the applicant, namely, nine-gauge copper bundle and the pieces of nine-gauge copper would fall under entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969, and are liable to be taxed accordingly ?

(2) If an answer to the aforesaid question is in the negative, under which entry and schedule to the Gujarat Sales Tax Act, 1969, the goods fall, and what is the rate of tax on the sales thereof ?"

4. As earlier pointed out, neither the Deputy Commissioner nor the Tribunal has considered the question of fact whether or not the articles or goods in question are wire "rods". For the purposes of determination of the contention raised by the assessee, it was indeed necessary for those authorities to have decided the said question. In view of their failure to do so, we would not be able to answer the aforesaid questions straightway and different procedure will have to be adopted, as would be evident from the concluding portion of this judgment. We shall, so far as the present reference is concerned, only consider the question whether, on a true and correct interpretation of entry 27, wire "rods" would be comprehended within the meaning of the word

"rods"

5. It would be convenient at this stage to set out the relevant entries.

6. Entry 27 of Schedule II-Part A reads as under :

8. It would appear that entry 13 of Schedule III is in the nature of a residuary entry and that any article or item of goods would fall within the said entry only if it is not covered by any of the entries in the other two schedules or in the preceding entries of Schedule III. The real question which, therefore, falls for consideration is whether, as contended by the assessee, wire "rods" are ""rods"" within the meaning of the said term as specified in entry 27 of Schedule II-Part A.

9. Before coming to grips with this problem, it would be pertinent to note that entry 27 is cast in very wide words. It takes in articles manufactured out of non-ferrous metals and alloys cast into different sizes and shapes such as sheets, "rods", bars, slabs, blocks, ingots and circles. What is significant to note is that besides including these articles of various sizes and shapes, the entry also covers scrap of non-ferrous metals and alloys. The inclusion of articles or goods of various sizes and shapes from sheets to blocks and the inclusion even of scrap indicates that the legislature wanted this entry to cover a wide variety of articles manufactured out of non-ferrous metals and alloys. Besides, there is no internal indication requiring the entry as a whole or each one of the items specifically mentioned therein to be given a narrow or constricted meaning. When, therefore, the question arises as to the true meaning of each one of the items mentioned in the said entry, it would be legitimate to approach the question bearing in mind that there is no reason to confine its scope and ambit to a restricted field.

10. The specific item with which we are concerned herein is ""rods"". In the context in which the said word occurs in the entry in question, it means a straight bar of metal slender in proportion to its length. Ordinarily, the word ""rods"", which is used in plural, would include all varieties of "rods". Wire "rods" are a variety of "rods" and there does not appear to be any reason to hold that they are not comprehended within the meaning of the word ""rods"" in the relevant entry.

11. On behalf of the revenue, two contentions were urged in support of the contrary view. First, that entry 27 has specifically described various articles or items of goods manufactured out of non-ferrous metals and alloys and that even items like bars and "rods", which are broadly similar with little difference as to the size, are separately mentioned and that, under such circumstances, in the absence of specific reference to wire "rods", it would not be legitimate to hold that the term ""rods"" includes wire "rods" and, secondly, that wire rod, being a distinct commercial commodity, is a separate taxable article or entity for the purposes of sales tax and that, as such, the said article is not comprehended within the meaning of the word ""rods"". According to the revenue, wire "rods" are covered by the residuary entry 13 of Schedule III. For the reasons which follow, we are unable to uphold these contentions.

12. It is true that entry 27 specifically mentions various articles or goods manufactured out of non-ferrous metals and alloys which are covered by it and that articles broadly similar such as bars and "rods" are separately enumerated therein. However, as stated earlier, entry 27 covers a very wide field. The word ""rods"" is used therein in a generic sense and every conceivable type of rod would, therefore, be covered by the said entry. It would be against the legislative intent, therefore, to hold in the context of such width and ambit of the entry that one of the varieties of "rods" is excluded from the coverage of the said entry, though ""rods"" are specifically included. The fact that items like ""rods"" and "bars", which are broadly similar in character, are separately mentioned is not a circumstance which can deter a broad view being taken. "Bars" and ""rods"", howsoever slender might be the difference between the two, are different commercial articles and it was, therefore, necessary that they should be mentioned separately. With regard to different varieties of "rods", however, the position would be different because the use of the word ""rods"" in plural and in a generic sense indicates that all types of "rods" were intended to be covered within the meaning of the said expression.

13. The revenue relied on the decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra ([1976] 37 S.T.C. 319 (S.C.)) and urged that since wire "rods" are distinct commercial commodities, they would not be comprehended within the meaning of the word ""rods"". We do not think that the decision in the Pyare Lal's case ([1976] 37 S.T.C. 319 (S.C.)) is of any assistance in the facts and circumstances of the case. The Supreme Court was there concerned with entry (iv) of section 14 of the Central Sales Tax Act, 1956, which under the main heading "iron and steel" enumerates certain goods as of special importance in inter-State trade or commerce. The enumeration is preceded by the expression "that is it say" which immediately follows the words "iron and steel". The Supreme Court considered the legislative history in order to ascertain the intention of the legislature behind enumerating different goods as separate sub-items under the main heading "iron and steel" and held that each sub-category of a sub-item retained its identity as a commercially separate item for the purpose of sales tax so long as it retained the sub-division. The Supreme Court also considered the meaning of the expression "that is to say" and held that, in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression was apparently meant to exhaustively enumerate the kind of goods in a given list. It is in this context that the following observations came to be made upon which the revenue seems to place reliance :

"The purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it."

14. The extracted observation has to be read in the context of the legislative history and the would in which the relevant entry therein considered was cast in the scheme of the statute. Those observations cannot be lifted and applied straightway in the context of entry 27 with which we are concerned and which has to be interpreted against its own background and in its own context and collocation.

15. The conclusion is, therefore, inevitable that the word ""rods"" in entry 27 must be taken to include all the different varieties of "rods" including wire "rods". If, therefore, the goods or articles in which the assessee dealer are, in fact, wire "rods", they must be taken to be covered by entry 27. In that view of the matter, entry 13 cannot be attracted.

16. As earlier pointed out, the difficulty which, however, arises in the present case is that neither the Deputy Commissioner nor the Tribunal has recorded a clear finding on the question whether the items covered by the bills which were presented along with the application under section 62 could legitimately be called wire "rods". In view of the failure on the part of the authorities to consider and find whether the articles or goods in which the assessee deals are wire "rods", we are unable to finally answer the question on the materials placed before us. Two courses are open to us under such circumstances : to call for a supplementary statement of the case from the Tribunal or to decline to answer the questions raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 69(4) in the light of the answer of this Court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will presumably be restricted to the evidence on the record and may not be entitled to take additional evidence. That may result in injustice. Under the circumstances, following the decision of the Supreme Court in Commissioner of Income-tax v. Indian Molasses Co.P. Ltd. ([1970] 78 I.T.R. 474 (S.C.)), rendered in the context of section 66 of the Indian Income-tax Act, 1922, we think it appropriate to decline to answer the questions on the ground that the Tribunal has failed to consider and decide the question whether the articles or goods in question in which the assessee deals are wire "rods". It will be open to the Tribunal to dispose of the appeal under section 69(4) in the light of the observations made by this Court after determining the said question which ought to have been decided. We wish to clarify that the only question which requires to be determined under section 69(4) is whether the said articles or goods are wire "rods". If the answer to the said question is in the affirmative, the Tribunal will dispose of the appeal on the basis that those goods are covered by entry 27. If the answer to the said question is in the negative, the appeal of the assessee must obviously fail.

17. Reference accordingly stands disposed of with no order as to costs.

18. Reference disposed of accordingly.