JUDGMENT
Venkataswami, J.
1. The petitioner, an assessee on the file of the Assistant Commissioner (Commercial Taxes), Central Assessment Circle I, Coimbatore, under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as “the Act”), aggrieved by the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, in C.T.A. No. 459 of 1981 dated January 27, 1982, has filed this revision.
2. The assessment year in question is 1978-79. The disputed turnover amounting to Rs. 33,11,816.85 represents sales of bearings for diesel engines sold to various dealers. According to the petitioner/assessee, sales of bearings for diesel engines will squarely fall under entry 111 of the First Schedule to the Act, and as such, liable to tax at 8 per cent in the absence of production of form 17, and on production of the declaration under form 17, concessional rate of tax alone will have to be levied. On the other hand, the Revenue levied tax on a turnover of Rs. 29,52,596.38 at 13 per cent single point treating the turnover falling under entry 3 of the First Schedule and the balance of the turnover of Rs. 3,59,220.41 at 9 per cent treating that turnover falling under entry 55 of the First Schedule. The Tribunal accepted the levy of tax at 13 per cent and 9 per cent as levied by the Revenue rejecting the case of the assessee that the turnover must be taxed only under entry 111 of the First Schedule. Hence the present revision petition.
3. Mr. K. J. Chandran, the learned counsel appearing for the petitioner, submitted that entry 111 of the First Schedule, being a special entry for oil engines and parts and accessories, introduced for the first time by Tamil Nadu Act 23 of 1974 from March 4, 1974, will exclude all other general entries like entry 3 and entry 55. The bearings in question having been sold only for diesel engines, the tax liability has to be fixed with reference to entry 111 of the First Schedule which is a special entry and not under entry 3 or entry 55 of the First Schedule which are general entries.
4. The next contention of the learned counsel for the petitioner is that the Tribunal’s view that the rate of tax has to be fixed with reference to the use to which the goods are put, is not sustainable. The other contention of the learned counsel is that if persons administering law, namely, sales tax, understand the entry in a particular way and issue clarifications when asked for, that cannot be lightly overlooked, and to the extent possible, those clarifications must be given effect to.
5. The learned Additional Government Pleader (Taxes), in answering the contentions advanced by the learned counsel for the petitioner, submitted that the sales of bearings by the petitioner being to manufacturers of tractors, bulldozers and automobiles, the levy of tax treating those sales under entry 3 or entry 55 is justified. He submitted that any clarification issued by the Board of Revenue or Government is not binding on the Tribunal or the court if the entry warrants a different interpretation.
6. On the first contention that “special excludes general”, the learned counsel for the petitioner placed reliance on two judgments, one of this Court and another of the Gujarat High Court. In State of Tamil Nadu v. Blue Star Engineering Co. reported in [1977] 39 STC 194, a Division Bench of the Madras High Court has observed as follows :
“In order to come within the scope of entry 41 of Schedule I to the Tamil Nadu General Sales Tax Act, 1959, it is not enough if electrical power is used in the working of the equipment. It must essentially be electrical machine or electrical goods described in that entry. Moreover, where there are two entries, one general and the other particular, the particular or specific entry should be applied for the purpose of levying the tax. Entry 1 specified duplicating machines and, therefore, machines intended for taking copies of blue prints and documents were taxable only under that entry even if they were usable only with the aid of electricity.”
7. In Shree Ram Industries v. State of Gujarat reported in [1974] 34 STC 153, a Division Bench of the Gujarat High Court has observed as follows :
“The authorities under the Bombay Sales Tax Act, 1959, should look into all the entries in the various schedules and find out which is the appropriate entry relating to the article which is sought to be taxed. If there is apparently any conflict between a general provision and a special provision attempt must be made to construe them harmoniously and a general entry must give way to a special entry. Section 5 cannot be construed to mean that once the commodity or article is taken out of the entries in Schedule A to the Act because the same is governed by a specific entry contained in other schedules still the turnover in respect of the article or commodity has to be given an immunity from the liability to pay tax.”
8. To appreciate this contention, it is necessary to set out entries 3, 55 and 111, as they stood at the relevant time. They read as follows :
—————————————————————–
"S. Description of the goods Point of Rate of Effective
No. levy tax from
(1) (2) (3) (4) (5)
per cent
-----------------------------------------------------------------
3. Entry from 23-12-1964 At the 11 1-12-1965
point of
Motor vehicles including first 12 18-6-1967
motor cars, motor taxi-cabs, sale
motor cycles and cycle in the 15 26-2-1970
combinations, motor scooters, State
motorettes, motor omni buses,
motor vans and motor lorries,
chassis of motor vehicles,
bodies built on chassis of
motor vehicles belonging to
others (on the turnover
relating to bodies),
component parts of motor
vehicles, all varieties of
trailers, by whatever name
known, tyres (including
pneumatic tyres) and tubes
ordinarily used for motor
vehicles and trailers
(whether or not such tyres
and tubes are also used for
other vehicles), and articles
(excluding batteries) adapted
for use generally as parts,
parts and accessories of motor
vehicles and trailers.
* * *
55. Entry from 23-12-1964
All varieties of tractors and
bulldozers, component parts of
tractors and bulldozers,
tyres (including pneumatic
tyres) and tubes ordinarily
used for tractors and
bulldozers (whether or not such
tyres and tubes are also used
for other vehicles), and,
articles (excluding batteries)
adapted for use generally as
parts and accessories of
tractors and bulldozers.
* * *
111. Original & present entry :
Oil engines and parts and
accessories.
----------------------------------------------------------------"
9. It is the contention of the learned counsel for the petitioner that after March 4, 1974, oil engines and parts and accessories will fall only under entry 111, being special entry. On facts, it is not in dispute that the bearings sold by the petitioner/assessee were for diesel engines (oil engines). It is the definite case of the assessee before the Tribunal that there is no evidence that the items sold by the assessee could be used as component parts of automobiles, tractors other than diesel engines used in them. In other words, diesel engines (oil engines) are used in the manufacture of other automobiles, tractors and bulldozers. But the fact remains that the bearings sold by the assessee are intended for use in diesel engines. It does not appear from the order of the Tribunal, that the contention of the assessee, namely, that the goods sold by them cannot be used for any purpose other than it is intended to be used as spare parts of diesel engines has been controverted by the Revenue. In the light of the entries extracted above and in the light of the facts placed before the Tribunal, not seriously controverted by the Revenue, and in the light of the judgment quoted above, we are of the view that the learned counsel for the petitioner is well-founded in his contention that entry 111 being special, will exclude entries 3 and 55.
10. The Revenue as well as the Tribunal mainly placing reliance on a judgment of this Court in State of Tamil Nadu v. Sha Maggajee Saremal and Brothers reported in [1976] 38 STC 118, held that the bearings sold by the assessee will fall under entry 3 or entry 55, as the case may be. In [1976] 38 STC 118 (State of Tamil Nadu v. Sha Maggajee Saremal and Brothers), a Division Bench of this Court, while considering the sales of spare parts for diesel engines for the assessment year prior to the introduction of entry 111, held as follows :
“Entries in the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, being specific goods in respect of which a single point levy is prescribed, though they might be goods which come under the description of goods in section 3, they could be taxed only to single point and not to multi-point under the general provision of section 3.
The assessee imported tractor parts under an import licence which authorised the assessee to import only spare parts for agricultural tractors. The assessee also paid customs duty as for spare parts for agricultural tractors. But in most of the transactions, the assessee had sold the articles as ‘spare parts for diesel engines’. The question for consideration was whether the tax was leviable under entry 55 of the First Schedule or under the general provision contained in section 3 :
Held, that entry 55 of the First Schedule mentioned all tractors and spare parts for those tractors as being liable for single point levy at the point of first sale in the State. As the goods sold by the assessee being parts of tractors, they would squarely come under entry 55 of the First Schedule and would be liable to tax under that entry.”
11. As rightly contended by the learned counsel for the petitioner, that decision being one related to the assessment year prior to the introduction of entry 111 and also prior to the judgment of the Supreme Court in Porritts & Spencer (Asia) Ltd. v. State of Haryana , cannot be pressed into service in the facts and circumstances of the case. In [1978] 42 STC 433 [Porritts & Spencer (Asia) Ltd. v. State of Haryana], the Supreme Court has held as follows :
“The use to which it may be put is also immaterial and does not bear in its character as a textile. It may be used for making wearing apparel, or it may be used as a covering or bed-sheet or it may be used as tapestry or upholstery or as duster for cleaning or as towel for drying the body. A textile may have diverse uses and it is not the use which determines its character as textile. It is, therefore, no argument against the assessee that ‘dryer felts’ are used only as absorbents of moisture in the process of manufacture in a paper manufacturing unit. That cannot militate against ‘dryer felts’ falling within the category of ‘textiles’, if otherwise they satisfy the description of ‘textiles’.”
12. This judgment of the Supreme Court has been followed by the Karnataka High Court in R. N. Dongare v. State of Karnataka reported in [1990] 77 STC 462, wherein the learned Judges held as follows :
“In Porritts & Spencer (Asia) Ltd.’s case , the Supreme Court had to consider the meaning of ‘textiles’ under similar entries in Punjab General Sales Tax Act. Cotton and woollen ‘dryer felts’ manufactured by the dealer which were woven textile felts of a kind commonly used in paper-making machinery were held as textile fabrics. These dryer felts were used as absorbents of moisture in the process of manufacture of paper, but it was held that this peculiar use of the article would not militate against ‘dryer felts’ falling within the category of textiles if otherwise they satisfy the description of ‘textiles’.
The ‘entry’ to be interpreted here is in a taxing statute; full effect should be given to all the words used therein. If a particular article would fall within a description, by the force of words used, it is impermissible to ignore that description, and denote the article under another entry, by a process of reasoning.
In the instant case, entry No. 78 is attracted by the Revenue, only by a process of interpretation of the words ‘and the like’ in the said entry. But, entry No. 110 is clearly attracted by the application of a simple and direct test of giving full meaning to the words used therein, that is to say, by giving due weight and effect to the meaning conveyed by the words ‘all articles made of plastics ……’. Therefore, we are of the view that the approach of the revising authority as well as of the Tribunal in applying entry No. 78 was not proper. Further, if there is any doubt as to which entry a particular article would fall, the benefit of doubt should be extended to the assessee in view of the well-established principle governing the interpretation of a taxing statute.”
13. In Girja Shanker Dubey v. Commissioner of Sales Tax reported in [1968] 21 STC 127, the Allahabad High Court has observed as follows :
“We doubt the correctness of the proposition that the purpose for which an article is sold by a vendor or the use to which it is put by the purchaser determines its classification for purposes of sales tax in every case.”
14. From the above decisions as well, it is clear that the Revenue as well as the Tribunal went wrong in placing reliance on the user theory to fix the rate of tax on the commodities sold by the assessee.
15. The issue can be viewed from yet another angle as projected by the learned counsel for the petitioner, namely, in the light of the clarification issued by the Board of Revenue (Commercial Taxes) as well as the Government. The learned counsel for the petitioner placed before the court relevant clarifications issued by the Board of Revenue and also the Government. We may also mention that these materials were placed before the Tribunal also. On a clarification sought by M/s. Simpson & Co. Ltd., the Board of Revenue, in B.P. Rt. No. 2728/77 dated June 23, 1977, issued a clarification which reads as follows :
“Sub : Tax – TNGST Act, 1959 – Parkins diesel engine – Rate of tax.
Ref : From Tvl. Simpson & Co. Ltd., Madras – Letter S. PVR/KR 1846 dated April 14, 1977.
RESOLUTION :
Thiruvalargal Simpson & Company Ltd., Madras are informed that Parkins diesel engines are taxable at 8 per cent single point at the point of first sale in the State under item 111 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.”
16. The Board of Revenue, again, in B.P. Rt. 5193/77 dated November 25, 1977, issued a clarification when asked for by Messrs. Simpson & Co. Ltd., as follows :
“Sub : Tax – TNGST Act, 1959 – Rate of tax on diesel engines – Clarification – Regarding.
Ref : From Tvl. Simpson & Co. Ltd., Ref. S/PVR/KR/231 dated July 18, 1977.
RESOLUTION :
Tvl. Simpson & Company Limited are informed that diesel engines fall under entry 111 of the First Schedule, irrespective of the use of which it is designed, manufactured and applied.”
17. Not satisfied with the above clarifications, Messrs. Simpson & Co., Messrs. Ashok Leyland, Messrs. Standard Motor Products (India) Limited, again sought clarification from the Government on this issue, and the Government, by letter dated October 9, 1978, clarified the position as follows :
“Sub : Tamil Nadu General Sales Tax Act, 1959 – Tax on diesel engines and spare parts and accessories used in automobiles, tractors, bulldozers – Reduction requested – Regarding.
Ref : From M/s. Simpson and Company Ltd., M/s. Ashok Leyland Limited and M/s. Standard Motor Products (India) Ltd. representation dated November 17, 1977.
I am directed to state that if the diesel engines sold by your firm are used by the purchasers as component parts in automobiles, etc., then they will be eligible for concessional rate of tax at 3 per cent under section 3(3)(1) of the Tamil Nadu General Sales Tax Act on the production of a declaration in form 17, as the diesel engines used in the automobiles and tractors are identifiable. If they are used for any other purpose other than by way of component parts, they are liable to tax at 8 per cent under item 111 to the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.”
18. The learned counsel also placed before the Court certain assessment orders passed on the basis of those clarifications. On the basis of those clarifications, the contention is that the Revenue had always understood entry 111 as a special one and they cannot turn round and say that the bearings sold by the assessee will not fall under entry 111. In support of that, the learned counsel placed reliance on the following judgments :
19. In Gondakar v. Commissioner of Commercial Taxes reported in [1983] 54 STC 190, the Karnataka High Court held as follows :
“Mr. S. Rajendra Babu, the learned counsel for the Revenue, however, submitted that the opinion expressed by the Commissioner in regard to classification of articles for the purpose of levy cannot be binding on this Court and it is therefore necessary to determine whether pickle jars would fall under entry 112 or under entry 118 of the Second Schedule to the Act. It is true that such circulars may not be binding on this Court. But, we are not called upon to adjudicate the question independent of the orders made by the statutory authorities. We are exercising a revisional jurisdiction under section 23 of the Act. We cannot therefore altogether ignore the circular issued by the competent authority and examine the question with pristine purity.
Section 3-A of the Act is similar to section 119 of the Income-tax Act, 1961. While dealing with the circulars issued by the Central Board of Revenue under section 119 of the Income-tax Act, the Supreme Court, at least in three decisions, has stated that such circulars are binding on all officers and persons employed in the execution of the Income-tax Act, even if the circulars deviate from the provisions of the Act [see : (i) Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner , (ii) Ellerman Lines Ltd. v. Commissioner of Income-tax [1971] 82 ITR 913 (SC) and (iii) K. P. Varghese v. Income-tax Officer, Ernakulam ]. We, therefore, do not see any good reason to ignore the circular which has a material bearing on the question raised in this case. On the contrary, we must proceed on the basis that the circular issued by the Commissioner stating that the turnover relating to the sale of pickle jars is liable to tax only at 4 per cent under entry 118, is binding on those who are charged with the duty to implement the provisions of the Act and it is not open to them to ignore that circular and tax such turnover at 8 per cent stating that jars in question fall under entry 112 of the Second Schedule to the Act.
There is also one other reason why we should not ignore the circular issued by the Commissioner. Apart from its binding character to the statutory authorities, it is, in our opinion, clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of entry 112 and entry 118. Dealing with this principle of construction, the Supreme Court in Varghese’ case observed at page 612 :
‘The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction, 1940 Edn., where it is stated in paragraph 219 that “administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive”. The validity of this rule was also recognised in Baleshwar Bagarti v. Bhagirathi Dass [1908] ILR 35 Cal 701, 713, where Mookerjee, J., stated the rule in these terms :
“It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it.”
and this statement of the rule was quoted with approval by this Court in Desh Bandhu Gupta and Co. v. Delhi Stock Exchange Association Ltd. .’
Mr. Babu, however, submitted that the principle of contemporanea expositio has no application to modern statutes and in support of his contention, he relied upon the decision of House of Lords in Governors of Campbell College, Belfast v. Commissioner of Valuation for Northern Ireland [1964] 2 All ER 705 at 727, wherein Lord Upjohn said :
‘As to contemporanea expositio, this doctrine is, I believe, truly confined to the construction of ambiguous language used in very old statutes where indeed the language itself may have had a rather different meaning in those days.’
But, our Supreme Court appears to have applied that doctrine even to modern statutes where the language is ambiguous as it would be clear from the decision in Varghese’s case . We have, therefore, no good reason for not depending upon the doctrine of contemporanea expositio, to clear the mist in the understanding of the nature of an article the components and classification of which are not plain as plain could be.”
20. In G. Ramaswamy v. State of Andhra Pradesh reported in [1973] 32 STC 309, the Andhra Pradesh High Court held as follows :
“One of the most significant aids of construction in determining the meaning of a tax provision is the administrative interpretation given to it by the agency that is responsible for its administration and enforcement. The authority for such interpretation is usually traced to three distinct sources. One of the sources is the interpretation given by the administrative agency or its officers, appearing in less formal rulings such as the departmental rulings and the like. Such interpretation, it is true, is formal, or unauthoritative administrative construction. Nevertheless the courts have given weight to it in the construction of doubtful language. It may be that since such rulings or communications are made without the authority, care and deliberation with which ordinarily interpretative rules are promulgated, their efficacy is reduced. The courts, however, in interpreting a word used in a statute may have regard to the interpretation placed by those who are presumed to be acquainted with the economic significance of the tax in question. It is true that these interpretations given by the authorities have no force of law nor are they binding upon the courts. Nevertheless they may serve as a tool of construction of some words used in the statute.”
21. In the light of these above pronouncements, we are of the view that the learned counsel is again well-founded in his contention that the Revenue cannot take a different stand. Viewed from any angle, we are of the view that the bearings sold by the assessee will fall only under entry 111 of the First Schedule, and the contrary view taken by the Tribunal cannot be sustained. The argument of the learned Additional Government Pleader placing reliance on [1976] 38 STC 118 (Mad.) (State of Tamil Nadu v. Sha Maggajee Saremal and Brothers), as already pointed out, is of no avail. Though the argument that circulars have no binding force on the Tribunal and the courts is a correct proposition of law, that does not mean, the court is precluded from looking into the clarification or taking cue from such clarification. Therefore, we do not agree with the learned Additional Government Pleader that the order of the Tribunal does not call for any interference.
22. In the result, the tax case is allowed. However, there will be no order as to costs.
23. Petition allowed.