Commissioner, Sales Tax, U.P. ... vs Swadeshi Polytex Limited, ...
2013 Latest Caselaw 4969 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 10
 

 
Case :- SALES/TRADE TAX REVISION No. - 1118 of 1990
 

 
Applicant :- Commissioner, Sales Tax, U.P. Lucknow
 
Opposite Party :- Swadeshi Polytex Limited, Ghaziabad
 
Counsel for Applicant :- S.C.
 
Counsel for Opposite Party :- Rajesh Kumar, K. Saxena
 

 
Hon'ble Arun Tandon,J.

Heard learned counsel for the department and Sri Kunwar Saxena, learned counsel for the Assessee.

The Assessee is involved in manufacture and sale of Synthetic Fibre and Methanol etc.

Dispute giving rise to the present trade tax revision pertains to assessment year 75-76. The assessee had disclosed his turnover at Rs. 43,32,89,991/- and paid tax of Rs. 66,19,600/- on the said turn over. A dispute arose before the assessing authority as to whether the assessee was liable to pay tax on Methanol as an unclassified item at the rate of 7% plus 1% or at the rate of 12% plus 1%, which was the tax applicable to Methyl Alcohol in terms of the Notification No. ST-II-3203/X-1012-1972 dated 29th September, 1972.

For assessment year 1975-76, under U.P. Sales Tax Act as also under Central Tax Act, the Assistant Commissioner (Assessment) Sales Tax, Ghaziabad, relying upon the English Random Dictionary & Directory of Plastics, vide assessment order dated 23rd February, 1983, held that Methanol was an other name for Methyl Alcohol and as such was liable to tax @ 12% under Notification dated 29th September, 1972.

Two first appeals were filed by the assessee, which were allowed in part. The Deputy Commissioner (Appeals) Sales Tax, Ghaziabad vide order dated 20th May, 1984 held, inter alia, that Methanol and Methyl Alcohol both were same chemical compound and, therefore, liable to tax as Methyl Alcohol @ 12%.

The assessee filed two separate second appeals, one under the U.P. Sales Tax Act and the other under the Central Sales Tax Act, before the Sales Tax Tribunal, Ghaziabad. The Tribunal in view of the stand taken by the representative of the department held that Methanol, being different from Methyl Alcohol, was liable to tax @ 7% and not 12% vide order dated 6th February, 1990.

The Commissioner, Sales Tax filed two Sales Tax Revision bearing No. 1117 of 1990 under the U.P. Sales Tax Act and Sales Tax Revision No. 1118 of 1990 under the Central Sales Tax Act before the High Court. The High Court vide judgement dated 13th October, 1998 refused to interfere in the matter. Accordingly, both the revisions were dismissed.

The department filed a Special Leave to Appeal before the Apex Court only in respect of proceedings under the Central Sales Tax Act. No appeal was filed against the judgement of the High Court qua the proceedings under the State Sales Tax Act.

The Apex Court allowed the Civil Appeal No. 4207 of 2000, arising out of Sales Tax Revision No. 1118 of 1990, vide judgement dated 14th September, 2005. Order of the High Court has been set aside and the matter has been remanded to this Court with a direction to decide the matter on merits.

Learned Standing Counsel for the department submitted that the principles of res judicata do not apply in tax matters and even otherwise the order of the High Court passed in Revision No. 1117 of 1990 does not record reasons for upholding that Methanol and Methyl Alcohol were distinct commodities. Therefore, the judgement of the High Court in Revision No. 1117 of 1990 has no binding effect.

Learned Standing counsel for the department states that Methanol and Methyl Alcohol are two different names of the same commodity and for the purpose he has placed reliance upon the meaning of the word "Methyl Alcohol" as contained in OXFORD dictionary wherein it is mentioned that it is a toxic, colourless, volatile flammable liquid alcohol, made chiefly by oxidizing methane. It is also called methyl alcohol. He also refers to the English Random Dictionary and Directory of Plastics for the same purpose. Learned Standing Counsel further points out that the chemical formula of Methanol and Methyl Alcohol is one and the same i.e. CH3OH.

With reference to the Text Book on the subject of Organic Chemistry written by Mr. Arun Bahl and Mr. B.S. Bahl (published by S.Chand Company), he explains that Alcohols are named under three systems and that Methanol and Methyl Alcohol are just two names same commodity. Methyl Alcohol is a classified item subject to tax at the rate of 12% plus 1% as per the Notification dated 29th September, 1972. The Tribunal has committed a manifest error in treating the Methanol manufactured by the Assessee as distinct from Methyl Alcohol and therefore, committed a further error in treating it to be an unclassified item taxable at the rate of 7% plus 1%.

Faced with the aforesaid contentions raised on behalf of the Department, Sri Kunwar Saxena, learned counsel for the Assessee raised a preliminary objection, namely:

Section 6 of the Central Sales Tax Act creates the tax liability. The rate of tax on sales in the course of inter-state trade or commerce is provided under Section 8 of the said Act. Clause (b) of sub-section (2) of Section 8 provides for the rates to be applied in respect of goods other than declared goods. Since for the sale of Methanol inside the State of Uttar Pradesh, in the assessment year 1975-1976, tax has been determined at the rate of 7% plus 1%, as per the judgement of this Court dated 13th October, 1998 passed in Sales/Trade Tax Revision No. 1117 of 1990, the inter-state sales in respect thereof are liable to tax @ 10% only. The controversy as to whether Methanol was liable to tax at the rate of 7% or as Methyl Alcohol at the rate of 12% is therefore, irrelevant, for the assessment year 1975-76.

He then submitted that even assuming without admitting that the rate applicable was 12%, the liability of tax on sales of the Methanol of value Rs. 5,200/- would work out to Rs. 624/- as against tax already @ 10% i.e. Rs. 520/- only. This would at best create an additional liability of Rs. 104/- only, which is highly insignificant, for the present dispute.

On merits he points out that merely because chemical formula of two commodities is same, it will not mean that both commodities are commonly known as one and the same in the open market. By way of example, he refers to the case of Ice and water, both according to him have the same chemical formula, namely, H20, yet both are distinct commodities known differently in the common parlance. Therefore, the chemical formula cannot be the deciding factor for coming to the conclusion that Methanol and Methyl Alcohol are one and the same commodity. For the proposition, he has placed reliance upon the Division Bench judgement of this Court in the case of M/s. Goel Industries (Private) Ltd. vs. The Commissioner of Sales Tax, U.P. Lucknow reported in 1971 U.P.T.C.-697.

He submits that the Apex Court has consistently held that for proper classification of goods, the common parlance test had to be applied and dictionary meaning, or scientific or technical meaning have no relevance. He referred to the judgements of the Apex Court in the case of Ponds India Ltd. vs. Commissioner, Trade Tax, reported in 2008 U.P.T.C., 773, in the case of Asian Paints India Ltd. vs. Collector Central Excise reported in 1988-2-SCC-407 and in the case of Commissioner of Central Excise vs. Shri Baidyanath Ayurved Bhawan Ltd. reported in 2010 N.T.N. Vol. 42, page-63.

I have considered the submissions made by the learned counsel for the parties and have examined the records of the present trade tax revision.

The issue up for consideration before this Court is as to whether the Methanol and Methyl Alcohol are two names of the same commodity or they are different goods.

The definition of Methanol as contained in OXFORD dictionary reads as follows:

"methanol:

noun (mass noun) Chemistry

a toxic, colourless, volatile flammable liquid alcohol, made chiefly by oxidizing methan.

Also called METHYL ALCOHOL

* Chemical formula: CH3OH"

It is, thus, clear that the other name of Methanol is Methyl Alcohol. The Random Dictionary and Directory of Plastics also provide that Methanol and Methyl Alcohol are two names of the same commodity.

The Text Book on the subject of Organic Chemistry written by Mr. Arun Bahl and Mr. B.S. Bahl (published by S.Chand Company) explains the different systems adopted in the matter of nomenclature of Alcohols as follows:

(1)Common System. In this system alcohols (R-OH) are named as Alkyl Alcohols. The alkyl group attached to the -OH group is named and 'alcohol' is added as a separate word.

(2) Carbinol System. In this system alcohols are considered as derivatives of methyl alcohol which is called Carbinol. The alkyl group attached to the carbon carrying the -OH group are named in alphabtic order. Then suffice-carbinol is added.

(3) IUPAC System. In this system alcohols are named as Alkanols. The IUPAC rules are:

(a) Select the longest continuous carbon chain containing the -OH group.

(b) Change the name of the alkane corresponding to this chain by dropping the ending- e and adding the suffix-ol.

(c) Number the chain so as to give the carbon carrying the -OH group, the lowest possible number. The position of the -OH group is indicated by this number.

(d) Indicate the positions of other subsituents or multiple bonds by numbers.

From the Text Book on the subject, it may be safely inferred that Methanol and Methyl Alcohol are two names of one and the same commodity. The chemical formula of both the commodities, namely, Methanol and Methyl Alcohol is also same i.e. CH3OH.

This takes the Court to the plea of assessee that the chemical formula cannot be the conclusive proof for holding that Methanol and Methyl Alcohol are one and the same commodity. In support of his case he had referred to the example of Ice and Water, whose chemical formula is same i.e. H2O. He supported his plea with reference to the judgements of the Apex Court in the case of Ponds India Ltd., Asian Paints India Ltd. and Commissioner of Central Excise (supras).

This Court may only record that Methanol and Methyl Alcohol both exist in liquid stage and therefore, not only their chemical formula and qualities are one and the same, their physical properties are also one and the same. It is only where the physical properties are entirely different that two products with same chemical formula like in the case of Ice and Water, may have different use and may be understood differently in common parlance.

It is on such facts only that the judgement of Division Bench of this Court in the case of M/s. Goel Industries Private Ltd. (supra) has to be understood and applied.

The plea so raised on behalf of the assessee does not in any way dilute the conclusion that the Methanol and Methyl Alcohol are two names of the same commodity.

So far as the judgement of this Court relied upon by the learned counsel for the assessee passed in Sales/Trade Tax Revision No. 1117 of 1990 in respect of assessment proceedings under the State Sales Tax Act, is concerned, suffice is to record that the High Court has not recorded any reasons in its judgement for holding Methanol and Methyl Alcohol to be distinct commodities. It has merely relied upon the orders of tax authorities made in previous assessment years. Such judgement does not lay down any binding precedent.

The preliminary objection raised on behalf of the assessee with reference to the provisions of Section 8 (2) (b) of the Central Sales Tax Act read with the orders of the tax authorities, which have become final upto the High Court to the effect that Methanol manufactured by the assessee was an unclassified item and the rate under the U.P. Sales Tax Act applicable was 7% plus 1%, and therefore, the rate of tax under Central Sales Tax would be 10%, does not appeal to the Court.

Section 8 (2) (b) of Central Sales Tax Act reads as follows:

"Section 8. ...............

(2).........

(b). In case of goods other than declared goods shall be calculated at the rate of 10% or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher."

From simple reading of Section 8 (2) (b), it is clear that the goods, which are other than declared goods are liable to be taxed at the rate applicable to sale or purchase of such goods inside the appropriate State or at the rate of 10%, whichever is higher. Meaning thereby that if any rate has been fixed under the State Act for sale or purchase of goods inside the State of Uttar Pradesh and this rate is higher than 10%, then the higher rate would apply for inter-state sale of the goods concerned.

The 'rate applicable' as per Section 8 (2) (b) is necessarily referable to the rate prescribed under the relevant provisions of the State Sales Tax Act and not with reference to the order of the Tribunal or of the High Court which, on the basis of evidence on record in a particular assessment year, may have held the goods to be unclassified. The rate applicable would necessarily mean the prescribed rate under the relevant notification. In the facts of the case, Notification No. ST-2-6203/X- 1012-1972 dated 29th March, 1972 holds the field. If the Tribunal had committed any error earlier in the matter of assessment under the State Sales Tax Act then this Court will not permit it to be perpetuated in all other assessment proceedings.

The issue of quantum of the difference payable is of not much relevance as the Trade Tax Revision is to be decided on the issue of law involved.

The preliminary objections raised on behalf of the assesse are, therefore, turned down.

The plea of the assessee that the scientific and technical meanings of the term or expressions need not to be applied in the matter of determination of a tariff or perceptions of products also has no application in the facts of the case. Suffice is to record that in the case in hand not only the meaning, which has been assigned to the commodity, namely, Methanol and Methyl Alcohol in the Text Book on the subject of Chemistry, but also that product in the Dictionaries has been taken into consideration by this Court, for coming to the conclusion that the Methanol and Methyl Alcohol are two names of the same commodity. The assessee could not refer to any other name of the goods in the open market except for Methanol and Methyl Alcohol.

Sri Saxena, learned counsel for the assessee contended that the representative of the department conceded before the Tribunal that Methanol and Methyl Alcohol are two different commodities and therefore, the Tribunal has not gone into the said issue any further.

If this Court is to take a different view, namely, that the Methanol and Methyl Alcohol are two names of the same commodity, then the matter should be remanded to the Tribunal for applying the common parlance test as per the judgement of the Full Bench of this Court in the case of British India Corporation Ltd., Kanpur vs. Commissioner of Sales Tax, U.P. reported in 1987 U.P.T.C.--394.

In my opinion there cannot be any concession on the issue of law by the representative of the department. It is an argument in desperation. Neither any material was on record before the tax authorities nor has otherwise been brought to the notice of this Court, so as to even prima facie establish that Methanol and Methyl Alcohol are known as two different commodities in the open market.

The proposition of law laid down by the Full Bench of this Court in the case of British India Corporation (Supra) cannot be disputed. However, in the facts of the case this Court finds that both on the basis of physical para meters as well as on the basis of chemical properties of the Methanol and Methyl Alcohol, there cannot be any bona fide issue qua the same being two names of the same commodity. This Court has no hesitation to record that there is no reason for directing any further examination by the Tribunal of the issue.

In view of the aforesaid, the order of the Tribunal dated 6th February, 1990 cannot be legally sustained and is hereby quashed.

This revision is allowed. There shall be no order as to costs.

(Arun Tandon, J.)

Order Date :- 7.8.2013

Sushil/-

Case :- SALES/TRADE TAX REVISION No. - 1118 of 1990

Applicant :- Commissioner, Sales Tax, U.P. Lucknow

Opposite Party :- Swadeshi Polytex Limited, Ghaziabad

Counsel for Applicant :- S.C.

Counsel for Opposite Party :- Rajesh Kumar, K. Saxena

Hon'ble Arun Tandon,J.

Allowed.

For order see order of date passed on the separate sheets.

(Arun Tandon, J.)

Order Date :- 7.8.2013

Sushil/-