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Traub India Private Ltd. Vs. the State of Maharashtra - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberSales Tax Ref. No. 5 of 1970
Judge
Reported in[1976]37STC258(Bom)
ActsBombay Sales Tax Act, 1959
AppellantTraub India Private Ltd.
RespondentThe State of Maharashtra
Appellant AdvocateV.H. Patil, Adv.
Respondent AdvocateC.A. Phadkar, Adv.
Excerpt:
.....covered by entry 20 in schedule c of act - tribunal held that lathes sold by applicants were electrical goods as it could only be worked with help of electrical energy - test that particular machine could only be operated with help of electrical energy was irrelevant - real test to be applied was that of common parlance - tribunal erred in deciding that goods were electrical goods in absence of evidence. - - the question has arisen for determination because the applicants, who are the manufacturers of automatic lathes, sold one traub single spindle automatic lathe model a 25 to messrs perfect machine tools company on or about july 30, 1966 and in respect of this sale submitted their invoice no. 469. in this case the supreme court held that while interpreting entries in..........the lathe sold by them could not be operated except with the use of electric energy and that the lathe was electrical goods and fell under entry 20 of schedule c to the said act. during the relevant period the description of goods set out in the said entry 20 of schedule c was as follows : 'electric goods, other than those specified in any other entry in this schedule or in any other schedule'. it is common ground that there is no other entry either in schedule c or in any other schedule under which the lathe sold by the applicants would fall, except that if it did not fall under the said entry 20 it would fall under the residuary entry 22 of schedule e to the said act. in arriving at his decision the commissioner of sales tax relied upon a decision of the tribunal in appeals nos. 67.....
Judgment:

Madon, J.

1. The question which falls for determination in the Reference is whether a lathe which can be operated only with the help of electric energy is electrical goods. The question has arisen for determination because the Applicants, who are the manufacturers of automatic lathes, sold one Traub Single Spindle Automatic Lathe Model A 25 to Messrs Perfect Machine Tools Company on or about July 30, 1966 and in respect of this sale submitted their invoice No. 66/0046 dated July 30, 1966. Thereafter on August 8, 1966 the Applicants made an application to the Commissioner of Sales Tax under section 52(1)(e) of the Bombay Sales Tax Act, 1959, to determine what tax was payable in respect of the said transaction of sale. According to the Applicants, the sale of this lathe sell under the residuary entry, namely, entry No. 22 of Schedule E to the Bombay Sales Tax Act, 1959. By his order dated November 28, 1966 the Commissioner of Sales Tax held that the printed literature supplied by the Applicants showed that the lathe sold by them could not be operated except with the use of electric energy and that the lathe was electrical goods and fell under entry 20 of Schedule C to the said Act. During the relevant period the description of goods set out in the said entry 20 of Schedule C was as follows :

'Electric goods, other than those specified in any other entry in this Schedule or in any other Schedule'.

It is common ground that there is no other entry either in Schedule C or in any other Schedule under which the lathe sold by the Applicants would fall, except that if it did not fall under the said entry 20 it would fall under the residuary entry 22 of Schedule E to the said Act. In arriving at his decision the Commissioner of Sales Tax relied upon a decision of the Tribunal in Appeals nos. 67 to 69 of 1965 - Valtas Limited vs. The State of Maharashtra - decided on December 13, 1965, in which case, purporting to follow the test which according to the Tribunal was laid down in William Jacks & Co., Ltd. Madras vs. The State of Madras, 1955 6 S.T.C. 301, the Tribunal held that the machinery which could be operated only with the help of electric energy would be electrical goods. Against this order of the Commissioner of Sales Tax the Applicants went in appeal to the Sales Tax Tribunal. The Sales Tax Tribunal again applied the same test which it had applied in the appeal of Voltas Limited, and following the said decision dismissed the Applicants' appeal. It is against this decision of the Tribunal that this Reference under section 61(1) of the said Act has been made to us at the instance of the Applicants, and the following question referred to us, namely :

'Whether on the facts and in the circumstances of the case and in view of the various entries in Schedule C to the Bombay Sales Tax Act, 1959, from time to time, the Tribunal was justified in holding that the goods sold by the applicant were covered by entry 20 in Schedule C to the Bombay Sales Tax Act, 1959 ?'

In William Jacks & Co. Ltd., Madras vs. The State of Madras, (1955) 6 S.T.C. 301, the Madras High Court held that it was neither possible nor desirable for the Court to embark on a preparation of an exhaustive list of what constituted 'electrical goods' within the meaning of that expression used in the Madras General Sales Tax Act, 1939. It further held that it was not even possible to devise a formula of universal application. In that case the Court also cited with approval the following observation of the Chairman of the Sales Tax Appellate Tribunal, Madras :

'I am accordingly of the view that barring a case where a machine cannot be used except with the application of electric energy, the machine has to be regarded as non-electrical.'

It is pertinent to note that neither under the Madras Act nor under the Bombay Act are electrical goods defined. In a later case - William Jacks and Co. Ltd., Madras vs. The State of Madras, (1960) 11 S.T.C. 340, which related to a lathe which can only be operated with the help of electric energy, the Madras High Court explained its decision in the earlier case of William Jacks & Co. Ltd., Madras vs. The State of Madras, (1955) 6 S.T.C. 301. It pointed out the background of the facts in which that judgment was given and said that it was only with respect to the specific goods concerned in that case that the Court had approved the above-quoted observations of the Sales Tax Appellate Tribunal, Madras, and the test laid down therein. The Court then proceeded to state as follows :-

'It is rather difficult to hold that a lathe, by itself, even though driven by electrical energy will come within the scope of the expression 'electrical goods'. We have pointed out that, in this case, the lathe in question was fitted with electrical motors, one main motor and six auxiliary energy this lathe could not be at all, and the Tribunal also pointed out that if the lathe was to be worked with power other than electrical power it would require changes-extensive changes. But none the less the position remains, it is a lathe, which was provided with electric motors for its use. Even a lathe designed for use normally with electrical motors may not become electric goods. Electric motors which no doubt form an integral part of the lathe in question are still there only to provide the motive power for working the lathe; the lathe it self is machinery, dependent no doubt on electricity in this case, but which could easily be designed and altered for use with other types of power. We have mentioned this only to indicate that prima facie view, that a lathe even when driven by electric power is not electrical goods, is left intact, despite the finding of the Tribunal, which in effect was that this was a lathe designed primarily for use with electrical energy. On a proper application of the test formulated in William Jacks & Co. Ltd. Madras vs. The State of Madras (1955) 6 S.T.C. 301, the lathe in question ought to have been excluded from the category of electrical goods.'

While referring to these two cases of the Madras High Court it must be borne in mind that those cases were decided before the judgment of the Supreme Court in Ramavatar Budhaiprasad vs. The Assistant Sales Tax Offier, Akola, and another, (1961) 12 S.T.C. 286, was delivered. In that case the Supreme Court held that the terms used in an entry in a Schedule to a Sales Tax Act must be construed not in any technical sense but as understood in common parlance. The test of common parlance was reiterated by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh, Indore vs. Jaswant Singh Charan Singh, (1967) 19 S.T.C. 469. In this case the Supreme Court held that while interpreting entries in statutes like the Sales Tax Acts, resort should be had not to the scientific or 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.

2. It is interesting to note that after the case before us was decided by the Tribunal, in another appeal filed by Voltas Ltd. namely, Appeal No. 51 of 1971 - Voltas Limited vs. The State of Maharashtra decided on October 12, 1972, the Tribunal has arrived a decision exactly contrary to that in the present case. The question in the second Voltas appeal was also whether a lathe driven by electric energy fell under entry 20 of Schedule C and was electrical goods. When the appeal first reached hearing before the Tribunal, the Tribunal found that no evidence had been taken by the Commissioner in determining this question under section 52(1) of the said Act, and remanded the matter to the Commissioner to take necessary evidence. Evidence was thereupon recorded by the Commissioner, and after referring to such evidence, the text books and various statutes on the subject and authorities of different High Courts, the Tribunal held that the evidence about the common parlance test satisfactorily showed that the article in question was not classified as electrical goods by the dealers dealing in that commodity, and held that it fell under the residuary entry 22 of Schedule E to the said Act. Following this decision in the second Voltas case, in another application under section 52 of the said Act made by the Applicants before us in which the applicants again went in appeal from the decision of the Commissioner, namely, Second Appeal No. 4 of 1972 - Traub India Private Ltd. vs. The State of Maharashtra - decided on August 20, 1973, the Tribunal held that the lathes which could only be operated with the help of electric energy sold by the applicants fell not under entry 20 of Schedule C but under entry 22 of Schedule E to the said Act.

3. In the light of the above judgments of the Supreme Court, it is clear that the basis upon which both the Commissioner of Sales Tax and the Tribunal proceeded in the present case is erroneous and unsupportable in law. Neither the Tribunal nor the Commissioner applied the common parlance test not did the Commissioner take any evidence as to whether the type of lathes sold by the Applicants was understood in common parlance or by dealers dealing in the said commodity as electrical goods. Both proceeded simply on the basis that whatever could only be worked with the help of electrical energy constituted electrical goods. This test has been rejected, not only by the Madras High Court in William Jacks and Co. Ltd. Madras vs. The State of Madras, (1960) 11 S.T.C. 340, but also by the same High Court in Deputy Commissioner of Commercial Taxes, Madurai Division, Madurai vs. Ravi Auto Stores, (1968) 22 S.T.C. 172; by the Andhra Pradesh High Court in The State of Andhra Pradesh vs. Indian Detonators Ltd., Hyderabad, (1971) 28 S.T.C. 84; and by the Madhya Pradesh High Court in J. B. Advani-Oertikon Electrodes, Pvt. Ltd. vs. The Commissioner of Sales Tax, M.P. (1972) 30 S.T.C. 337. In each of these cases it was held that the test that a particular machine could only be operated with the help of electric energy was irrelevant, and the real test to be applied was that of common parlance. The difficulty in the present case, however, is that neither the Commissioner of Sales Tax nor the Tribunal proceeded on the only true test nor took any evidence as to what the lathes of the types sold by the Applicants meant in common parlance. No evidence was recorded because both the Commissioner of Sales Tax and the Tribunal proceeded on an entirely erroneous basis. Even though the Commissioner of Sales Tax did not record any evidence, the Tribunal at least ought to have either recorded such evidence itself or remanded the matter to the Commissioner of Sales Tax to record the necessary evidence, as it did in the second Voltas appeal. In view of this state of affairs, it is not possible for us to give any answer to the question submitted to us, except that the Tribunal erred in deciding the appeal before it in the absence of evidence, and should have before deciding the appeal either recorded the necessary evidence itself or remanded the appeal to the Commissioner of Sales Tax to record such evidence, and we answer the question submitted to us accordingly.

4. There will be no order as to costs of the Reference.

5. The fee of Rs. 100 paid by the Applicants will be refunded to them.


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