N.K. Agrawal, J.@mdashFollowing two questions have been referred to this Court u/s 42(1) of the Haryana General Sales Tax Act, 1973 (for short, "the Act") :
1. Whether, on the facts and circumstances of the case, the sales of cartons/ packing materials printed by the dealer fall within item No. 11 of the Notification dated May 5, 1973 ?
2. Whether the Tribunal is right in its conclusion that the duplex board and the cardboard are the same commodities and are taxable at first stage ?
2. The assessee was running a printing press and also manufactured cardboard packing cases, boxes and cartons. During the assessment year 1984-85, the assessee had made sales of cardboard packing cases at Rs. 2,18,943. The assessee claimed that those sales were made to registered dealers and were, therefore, not to be subjected to tax at the hands of the assessee. The assessee had collected forms S.T. 15-A from the purchasing dealers who were registered dealers under the Act. The Assessing Authority, however, took the view that cardboard cases, boxes and cartons, manufactured and sold by the assessee, were the items specified at serial No. 11 of the Notification dated May 5, 1973 issued by the Governor of Haryana u/s 18 of the Act and were, therefore liable to be taxed at the first stage of sale. The assessee''s plea, however, was that the items manufactured by him were not items of cardboard but had been manufactured from the duplex board as packing materials. These items were, therefore, claimed to be outside the purview of the entry at serial No. 11 of the said notification.
3. Sales tax is leviable at the first stage of sale on such goods which have been notified by the State Government u/s 18 of the Act. The Governor of Haryana, in exercise of the powers conferred by Section 18 of the Act, issued Notification dated May 5, 1973 specifying the goods which were subjected to tax at the first stage of sale. Item No. 11 in the said notification reads as under :
"11. Paper (other than newsprint), cardboards, straw boards and their products ;"
4. The assessee has taken the plea that what he manufactured as packing materials was made from the duplex boards which were different from the cardboards. It was further argued by the assessee that the products manufactured from duplex boards were packing materials and they could never be treated as cardboards. The packing materials had not been specified under the said notification as the goods subjected to the levy of tax at the first stage of sale.
5. The assessee''s plea that duplex board was different from the cardboard does not find support from any material on record. It has, however, been admitted that cardboard was polished on both sides while the duplex board was polished on one side only. There was no other difference. It is, therefore apparent that basically and primarily both cardboard and duplex board, are the same except for the minor difference that one is polished on both sides and the other is polished on one side only. However, that would not make them different commodities. The assessee''s second plea was that the items manufactured by him were sold as packing materials and were, therefore, different from cardboard. Since the items, manufactured by the assessee, were different from cardboard, test as to what the final product was called in common parlance and commercial sense should be applied. It is to be noticed that, in item No. 11 of the notification, cardboards and their products have been declared to be the goods on which tax is leviable at the first stage of sale. The assessee manufactured packing cases, boxes and cartons from the cardboards and duplex boards and, therefore, they were definitely and unmistakably products of the cardboards and duplex boards. The assessee sells such cases, boxes and cartons as packing materials but it would not make any difference and the items shall still remain as the products of the cardboards. It is not possible to agree with the assessee that the packing materials, manufactured from the cardboards, cannot be treated to be the products of the cardboards. The different products, manufactured from the cardboards, may be called by different names, such as cases, boxes and cartons but that would not lead to a conclusion that such items were not the products of the cardboard.
6. A question had arisen under the U.P. Sales Tax Act before the Allahabad High Court in Commissioner of Sales Tax, U.P., Lucknow v. Indian National Industries [1974] 33 STC 81(Luck) whether a spoon was a part of "cutlery". It was held that spoons were not recognised in the commercial world to be included in the trade of cutlery. They formed another trade. It is thus the use of the term in the commercial world and in the trade which has been treated to be the determining factor.
7. A question arose before the Andhra Pradesh High Court in
8. In another case, i.e.,
9. This High Court in Kanwar Brothers v. State of Punjab [1992] 84 STC 307(P&H) examined entry 17 of Schedule "A" to the Punjab General Sales Tax Act, 1948, and expressed the view that, while interpreting items in statutes like the Sales Tax Act, resort should be had not to the scientific or the technical meaning of such terms, but to their popular meaning, or the meaning attached to them by those dealing in them, that is to say, to their commercial sense.
10. In another case, i.e., Gupta Agencies v. State of Punjab 1994 92 STC 543(P&H) this High Court had again an occasion to examine Schedule "A" to the Punjab General Sales Tax Act, and reiterated the view that the test is whether an article is exclusively or at least predominantly used for the particular purpose envisaged in the legal provision. The question in that case had arisen whether an electric motor was an electric equipment for generation, transmission or distribution of electric power. It was held that electric motors are not used for transmission or distribution of electricity and, therefore, they do not fall within the ambit of excepted goods mentioned in entry 17 of Schedule "A" to the Act and, therefore, are liable to sales tax at the rate of 10 per cent.
11. The Supreme Court in
12. In State of Uttar Pradesh v. Kores (India) Ltd. [1977] 39 STC 8 the Supreme Court was examining a question whether carbon paper was "paper" as envisaged by entry 2 of the notification dated July 1, 1966, issued under the U.P. Sales Tax Act, It was held that a word, which is not defined in an enactment, has to be understood in its popular and commercial sense with reference to the context in which it occurs. The word "paper", not having been defined either in the U.P. Sales Tax Act or in the Rules made thereunder, has to be understood in the sense in which persons dealing in and using the article understand it. The word in the common parlance or in the commercial sense means paper which is used for printing, writing or packing purposes. It is thus again clear that, where an item has not been defined in the relevant tax legislation, the word shall be understood in the sense in which it is generally understood in the commercial sense. In view of the test laid down by the Supreme Court, it is abundantly clear that a word shall be given a meaning which it generally receives at the hands of the people engaged in the trade.
13. The word "product" came to be examined by the Supreme Court in Collector of Central Excise, Coimbatore v. Portein Products of India Ltd. [1989] 74 STC 98. It was observed as under :
"The word ''product'' is defined in Webster''s Comprehensive Dictionary as ''anything produced or obtained as a result of some operation or work''. The expression ''bone products'', therefore, merely means anything produced or obtained from bones. Whether such derivation is by a simple physical process or by a chemical reaction would seem to make no difference to the end-product. Buttermilk, for instance, does not cease to be a milk product merely because a chemical process is involved in the transformation. The ossein and gelatine manufactured by the respondent can, without straining the expression used in the notification, be described as bone products."
14. The assessee''s plea that cardboards and duplex boards were altogether different items, cannot be accepted because it has already been found that both are basically and primarily same items though with minor difference regarding polishing. One is polished on both the sides and the other is polished on one side. That would hardly make any basic difference in the two items. Nothing has been brought on record to explain if duplex board was an independent item and not a variety or category of cardboard. In our considered opinion, duplex board was a variety and category of cardboard and, therefore, was not different from cardboard.
15. From a perusal of entry at serial No. 11 in the Notification dated May 5, 1973 issued u/s 18 of the Act, it is abundantly clear that cardboards as well as their products have been specified as the goods which shall be subjected to tax at the first stage of sale. There is no dispute to the fact that packing materials like cases, boxes and cartons, by whatever names they were sold by the assessee, were the products of the cardboard or the duplex board. The words "their products" used in entry No. 11 of the notification are wide enough to include all the items manufactured from the cardboards. In this light, the question, that packing materials should be treated differently for tax purposes, does not carry any significance inasmuch as entry at serial No. 11 encompasses within its purview all the products manufactured from the cardboards. Therefore, it is immaterial as to how and by what names different products of the cardboards are called in the trade.
16. In the result, both the questions, referred to this Court for opinion, are answered in the affirmative, i.e., against the assessee and in favour of the department.
