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Associated Electronic and Electrical Industries Pvt. Ltd. Vs. Assistant Collector of Central Excise, Bangalore and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 20908 of 1980
Judge
Reported in1985(4)ECC11; 1986(6)LC68(Karnataka); 1985(22)ELT368(Kar); ILR1985KAR3716
ActsCompanies Act, 1956; Central Excise Rules, 1944; Central Excises Act, 1944; Constitution of India - Article 226
AppellantAssociated Electronic and Electrical Industries Pvt. Ltd.
RespondentAssistant Collector of Central Excise, Bangalore and ors.
Appellant AdvocateS. Rangarajan and ;K.G. Raghavan, Advs.
Respondent AdvocateK. Shivashankar Bhat, Central Govt. Senior Standing Counsel
Excerpt:
.....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. sanghi that 'vinyl pyridine is one component of terpolymer of butadiene, styrene and vinyl pyridine used in latex form to promote good adhesion between rubber and textiles, particularly rayon and nylon. under the trade names of 'gentac' and 'pyratex' it is extensively used in nylon tyre cord saturation because it gives better adhesion between the cord and the rubber in which the cord is imbedded than no other latices'.mr. 4. it is well-settled that in interpreting items in statutes like the excise tax act or sales tax acts, whose primary objects is to raise revenue and for which..........has been neatly summarised in these words : 'telephone and telecommunications systems : the term telephone (from the greek roots telephone, 'far' and phone 'sound') was first used to describe any apparatus for conveying sound) to a distant point. specifically, the word was applied as early as 1976 to a megaphone, and not long afterward to a speaking tube. the name string telephone was given some years after its invention (1667) to a device in which vibrations in a diaphragm caused by voice or sound waves are transmitted mechanically along a string or wire to a similar diaphragm that reproduces the sound. still later, devices employing electric current to reproduce at a distance the mere pitch of musical sounds were called telephones. nowadays, the name is assigned almost.....
Judgment:

This rule is directed against the claim of the Central excise authorities for payment of excise duties in respect of 'phonocom'. It is alleged by the petitioner that they are nothing but telephone and therefore not (sic) exempted from duties. It has been alleged that 'phonocom' cannot be a telephone under the Indian Telephone Act and it is well known that business of telephone can only be carried out by the Indian Posts and Telegraphs Department. In any case, this 'phonocom' is manufactured by a private company for intercommunication system and therefore this cannot be called as telephone as manufactured by the Government of India.

1. In that view of the matter there is no merit in the submission made by the petitioner.

2. The rule is therefore discharged. There will be no order as to costs.

3. I am told that M. N. Roy, J., took similar view in C.R. 15407 (W) of 1976 Radio Supply Stores (P). Ltd. v. Union of India decided on 13-5-1982.'

11. But, Sri. Rangarajan has urged that this ruling, which neither refers to and examine his submissions nor is supported by reasons, cannot be followed by this Court as a persuasive precedent.

12. An examination of the ruling reproduced in full discloses that the criticism of Sri. Rangarajan is not wholly unjustified. With great respect to his Lordship, I very reluctantly accede to this criticism of Sri. Rangarajan and proceed to examine the question independently.

13. The Act has been enacted to levy and collect duties of excise on goods manufactured or produced in the country. The duties of excise or taxes levied on manufactured goods directly on the manufacturer but indirectly on the consumer indisputably is a taxation measure. In interpreting a taxation enactment the oft quoted classical statement of Rowlatt, J., in Cape Brandy Syndicate v. Inland Revenue Commissioners - (1921) 1 KB 64 at page 71 approved by our Supreme Court in more than one case which reads thus, must be kept in view :

'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax, nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

14. On the principles to be applied in the interpretation of dutiable items or entries occurring in the Act, the matter is concluded by several rulings of the Supreme Court. In Dunlop India Limited v. Union of India - 1983 E.L.T. 1566 (S.C.) = AIR 1977 S.C. 597; the Supreme Court dealing with an entry occurring in the very Act, reviewing all the earlier cases, English and American Courts, has restated the principles in these words :

'31. It is well established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the trade and its popular meaning should commend itself to the authority.

32. Dealing with the meaning of the term 'vegetables' in the Excise Tax Act in King v. Planters Nut and Chocolate Company Limited - 1951 CLR 122, the Exchequer Court observed as follows :

'Now the statute affects nearly everyone, the producer or manufacturer, the importer, wholesaler and retailer, and finally, the consumer who, in the last analysis, pays the tax. Parliament would not suppose in an Act of this character that manufacturers, producers, importers, consumers, and others who would be affected by the Act, would be botanists. The object of the Excise Tax Act is to raise revenue, and for this purpose to class substances according to the general usage and known denominations of trade. In my view, therefore, it is not the botanist's conception as to what constitutes a 'fruit' or 'vegetable' which must govern the interpretation to be placed on the words, but rather what would ordinarily in matters of commerce in Canada be included therein. Botanically, oranges and lemons are berries, but otherwise no one would consider them as such.'

The Exchequer Court also referred to a pithy sentence from 200 Chests of Tea, per Story, J., (1824) 9 Wheaton (US) 430 that 'the Legislature does not suppose our merchants to be naturalists, or geologists or botanists'.

33. The above Planters Nut case 1951 CLR 122 was referred to with approval by this Court in Ramavatar Budhji Prasad v. Assistant Sales Tax Officer : [1962]1SCR279 . In Ramavatar's case, this Court was concerned with the meaning of the word 'vegetables' occurring in C.P. and Berar Sales Tax Act, 1947. This Court held as follows :

'But, this word must be constructed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be constructed in its popular sense meaning 'that sense which people conversant with the subject matter with which the statute is dealing would attribute to it.' It is to be constructed as understood in common language.' 34. Again in the Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Singh Charan Singh : [1967]2SCR720 this Court had to deal with the word 'charcoal' used in Madhya Pradesh General Sales Tax Act. It was contended in that case that 'charcoal' would be covered under entry I of part III of the Second Schedule to that Act. This Court while holding that charcoal would be included in coal, observed as follows :

'Now, there can be no dispute that while coal is technically understood as a mineral product, charcoal is manufactured by human agency from products like wood and other things. But, it is now well settled that while interpreting items in statutes like the Sales Tax Acts, 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.' This Court again referred with approval to the decision in Planters Nut case - 1951 CLR 122 and followed the principle laid down in Ramavatar's case - : [1962]1SCR279 . In South Bihar Sugar Mills Limited v. Union of India : 1973ECR9(SC) the question that was raised related to item 14H in the First Schedule to the Central Excises and Salt Act, 1944, which contained, compressed liquified or solidified gases, inter alia, carbon acid (carbon dioxide). This Court observed as follows :

'It is also not correct to say that because the sugar manufacturer wants carbon dioxide for carbonation purpose and sets up a kiln for it that the produces carbon dioxide and not kiln gas. It fact what he produces is a mixture known both to trade and science as kiln gas, one of the constituents of which is, no doubt, carbon dioxide.' This Court finally observed :

'This kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract item 14H in the First Schedule.' Similarly in Minerals and Metals Trading Corporation of India Limited v. Union of India = : 1973ECR23(SC) this Court dealing with a meaning of the word 'Wol fram ore' again approvingly referred not to the scientific or technical meaning but to the meaning attached to them by those dealing in them in their commercial sense.

35. Mr. Sanghi draws our attention to several authorities to impress upon us that butadiene styrene latices are compatible with many resins and modifiers. He also submits that the term vinyl pyridine has been used to include a variety of resins, plastics, elastomers, etc., and that V.P. latex exhibits outstanding adhesive properties. His main object is to show that V.P. latex is resin which is 'an omnibus term for a variety of hard brittle solid or semi-solid organic substances.' It is however, seen from an extract from the Dictionary of Rubber Technology, 1969 edition, by Alexander S. Craig produced by Mr. Sanghi that 'vinyl pyridine is one component of terpolymer of butadiene, styrene and vinyl pyridine used in latex form to promote good adhesion between rubber and textiles, particularly rayon and nylon.' We find the same description reiterated in a book 'Latex Natural and Synthetic' by Cook (a Reinhold Pilot Book) where at para 145 it is stated that 'there is one type of speciality rubber latex that deserves special notice. This is terpolymer of butadiene, styrene, and 2-vinyl pyridine. Under the trade names of 'Gentac' and 'Pyratex' it is extensively used in nylon tyre cord saturation because it gives better adhesion between the cord and the rubber in which the cord is imbedded than no other latices'. Mr. Sanghi, however, emphasises that V.P. latex is merely an adhesive and so is akin to resin and not to rubber.

36. We are, however, unable to accept the submission. It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry.'

In Indo International Industries v. Commissioner of Sales Tax Uttar Pradesh : 1981(8)ELT325(SC) the Court examining whether 'clinical syringes' were 'glassware' or not occurring in the U.P. Sales Tax Act, speaking through Tulzapurkar, J., has reiterated the principles in these words.

'4. It is well-settled that in interpreting items in statutes like the Excise Tax Act or Sales Tax Acts, whose primary objects is to raise revenue and for which purpose they classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment, then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted. In Ramavatar Budhai Prasad v. Assistant Sales Tax Officer, Akola : [1962]1SCR279 the question was whether 'betel leaves' fell within item 'vegetable' so as to earn exemption from sakes tax and this Court held that word 'vegetable' had not been defined in the Act, and that the same must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance and so construed it denoted these classes of vegetable matter which are grown in kitchen garden and are used for the table and did not comprise betel leaves within it and, therefore, betel leaves were not exempt from taxation. In Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh : [1967]2SCR720 , the question was whether the item 'coal' under entry 1 of Part III of Second Schedule to Madhya Pradesh General Sales Tax Act, 1958, included charcoal or not and this Court observed thus :

'Now, there can be no dispute that while coal is technically understood as a mineral product, charcoal is manufactured by human agency from products like wood and other things. But, it is now well-settled that while interpreting items in statutes like the Sales Tax Acts, 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.' Viewing the question from the above angle this Court further observed that both a merchant dealing in coal and a consumer wanting to purchase would regard coal not in its geological sense but in the sense as ordinarily understood and would include 'charcoal' in the term 'coal' and held that 'charcoal' fell within the concerned entry No. I of part III of Schedule II to the Act.

5. Having regard to the aforesaid well-settled test the question is whether clinical syringes could be regarded as 'glassware' falling within entry 39 of the First Schedule to the Act It is true that the dictionary meaning of the expression 'glassware' is 'articles made of glass' (see : Webster's New World Dictionary). However, in commercial sense glassware would never comprise articles like clinical syringes thermometers, lactometers, and the like which have specialised significance and utility. In popular or commercial parlance a general merchant dealing in 'glassware' does not ordinarily deal in articles like clinical syringes, thermometers, lactometers, etc., which articles though made of glass, are normally available in medical stores or with the manufacturers thereof like the assessee. It is equally unlikely that consumer would ask for such articles from a glassware shop. In popular sense when one talks of glassware, such specialised articles like clinical syringes, thermometers, lactometers and the like do not come up to one's mind. Applying the aforesaid test, therefore, we are clearly of the view that the clinical syringes which the assessee manufactures and sells cannot be considered as 'glassware' falling within entry 39 of the First Schedule to the Act.'

Bearing these principles it is necessary to ascertain the true scope of item No. 33D of the Act.

15. Item No. 33D of the Act reads thus :

'33D. Office machines and apparatus, including Twenty per centtypewriters, calculating machines, cash registers, ad valorem.cheque writing machines, accounting machines,statistical machines, intercom devices (but excludingtelephones), teleprinters and auxiliary machines foruse with such machines, whether in assembled orunassembled condition, not elsewhere specified.Explanation. - The term 'office machines and apparatus' shall be construed so as to include all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work, for data processing and for transmission and reception of messages'.

According to this item, all office machines and apparatus, including typewriters, calculating machines, cash registers, cheque writing machines, accounting machines, statistical machines, intercom devices, teleprinters and auxiliary machines for use with such machines, whether in assembled or unassembled condition not elsewhere specified are dutiable to duty at the rates specified against that entry. But, the very said item expressly excludes 'telephones' and they are not dutiable to duty under that item. The explanation appended to the item states that the term 'office machines and apparatus' shall be constructed as including all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for data processing and for transmission and reception of messages. As stated by Venkatarama Ayyar, J., in Bengal Immunity Company Limited v. State of Bihar, : [1955]2SCR603 , the Explanation appended to the item has to be read as an integral part of that item or entry or really as only one provision.

16. In item No. 33D, one of the equipments expressly included is 'intercom'. The Explanation appended to the item also directs that the term 'office machines and apparatus' detailed therein used for transmission and reception of messages, shall be construed as 'office machines and apparatus' of that dutiable item. But, that very item also excludes 'telephones' from duty thereunder. As held by the Supreme Court in all its rulings, notably in the two cases noticed earlier, we have to construe the terms 'intercoms' and 'telephones' in their popular sense and not in any scientific and technical sense.

17. The term 'intercom' is defined in the various dictionaries as under :

'(a) Intercom : Informal. 1. an intercommunication system, as of an aeroplane or a military tank. 2. a microphone or receiver of an intercommunication system (shortened form).

(vide : The Random House Dictionary of the English Language-the unabridged edition page 740).

(b) Intercom : Intercommunication system.

(vide : Webster's Third New International Dictionary - unabridged page 1177).

(c) Intercom : the system of intercommunication., esp., in aircraft.

(vide : Oxford Advanced Learner's Dictionary of Current English by A. S. Hornby at page 452).

(d) Intercom : interphones, intercommunication system.

(vide : Roget's International Theasurus - III Edition at page 365).

(e) Intercom : intercommunication system, a system by which one can talk through a machine to people in a near place, often to several people at once, as used by someone to call a secretary to his/her office from an outer room.

(vide : Longman Dictionary of Contemporary English by Chief Editor Paul Procter at page 583).

(f) Intercom : The system of internal communication by telephone, wireless, etc. between units of an organisation.

(vide : Dictionary of Business and Management by K. C. Parikh at page 168).'

The word 'intercom' is a shortened form of the term 'intercommunication system'. The term 'intercommunication system' is colloquially used as 'intercom'. According to all these dictionaries the term 'intercom' is a machine or an office equipment used for transmission and reception of messages in an office, establishment or a hotel. Even otherwise, in popular sense, an 'intercom' is a machine or is an office equipment used for transmission and reception of messages exclusively in an office. An 'intercom' in the very nature of design, object and manufacture performs the functions of an office equipment for transmission and reception of messages exclusively in an office which it is installed. An 'intercom' undoubtedly performs the functions of an internal communication system as an internal telephone. But, that does not make it a 'telephone' as one popularly understands, at any rate, in our country, whatever be its import in advanced countries like America and Japan where also the position does not appear to be anyway different. At any rate, in the Indian context, which alone should be the proper guide, an 'intercom' cannot be treated or equated to a 'telephone' that is generally and popularly associated with a public telephone maintained by the Posts and Telegraphs Department of Government.

18. In our country, when one proposes to purchase and installed an inter-com in his office or establishment, he does not ask the petitioner, the other manufacturer or supplier to quote the price of a 'telephone' or supply him a 'telephone', but decidedly and definitely uses only the term 'intercom' meaning as explained earlier or only as an office equipment to be exclusively used for transmission and reception of messages in his office and no other. What is true of the intending purchaser is also true of the manufacturer or supplier in our country.

19. The term 'telephone' derived from the words 'telephone' and 'phone' of Greek origin or Greek words, that mean 'far' and 'sound' respectively and defined in the general and technical dictionaries as under :

(a) Telephone : 1. an apparatus, system, or process for transmission of sound or speech to a distant point, esp. by an electric device - v.t.

2. to speak to or summon (a person) by telephone.

3. to send (a message) by telephone, v.i.

4. to send a message by telephone.

(vide : The Random House Dictionary of the English language-the unabridged edition page 1460).

(b) Telephone : 1. an instrument for reproducing sounds esp. articulate speech at a distance; as a : advice in which the voice or sound causes in a thin diaphragm vibrations that are directly transmitted along a wire or string connecting it to a similar diaphragm thus reproducing the sound; b : an apparatus consisting of a transmitter (as a microphone) for converting sound esp. of the human voice into electrical impulses or varying electrical current for transmission by wire, a wire, a receiver for reproducing the original sounds from such transmitted varying electrical current, and usu. a switch and a signalling device.

2. Any of various devices (as a sound signalling device or a speaking tube) resembling or suggestion the telephone, to communicate by telephone; call on the telephone-vt. 1. to send (as a message) by telephone. 2. to speak to (a person) by telephone : call on the telephone.

(vide : Webster's Third New International Dictionary - unabridged page 2350).

(c) Telephone : 1. An instrument, apparatus, or device for conveying sound to a distance.

(vide : The Oxford English Dictionary Volume XI (T-U) at page 150).

(d) Telephone means a combination of apparatus for conveying speech over a distance by means of audio frequency variations in current sent along over-head wires or underground cables.

(vide : Chambers Technical Dictionary).

(e) telephone. - Inevitably, in these days of annihilation of distance, this Greek prefix has been used with a freedom that makes it a prolific source of what are called in this book BARBARISMS. It began respectably enough with telescope, telegraph, telegram (though some purists would have had us say telegrapheme) telepathy and telephone, but is now promiscuous in its attachments e.g., television, teleprinter, telecommunications, telecontrol and others constantly multiplying. Indeed, it is time to recognize that tele (like anti, post and pre) has gate crashed into our vocabulary, and, being now naturalized, is free to associate without offence with any other member. Televise (a BACK-FORMATION from television) has not z. See-IZE, ISE.

(vide : Fowler's Modern English Usage Revised by Sir Earnest Gowers page 617).

In the New Encyclopaedia Britannica (Macropaedia Volume 18), at page 82, the true meaning, content of that term and its general concept has been neatly summarised in these words : 'Telephone and Telecommunications Systems : The term telephone (from the Greek roots telephone, 'far' and phone 'sound') was first used to describe any apparatus for conveying sound) to a distant point. Specifically, the word was applied as early as 1976 to a megaphone, and not long afterward to a speaking tube. The name string telephone was given some years after its invention (1667) to a device in which vibrations in a diaphragm caused by voice or sound waves are transmitted mechanically along a string or wire to a similar diaphragm that reproduces the sound. Still later, devices employing electric current to reproduce at a distance the mere pitch of musical sounds were called telephones. Nowadays, the name is assigned almost exclusively to apparatus for reproducing articulate speech and other sounds at a distance through the medium of electric waves. The term telephony covers the entire art and practice of electrical speech transmission, including the many systems, accessories, and operating methods used for this purpose. Telecommunications broadens the concept still further to cover all types of communication, including television data, teletypewriter, and faseimile.'

When one ascertains the meaning of this term with due regard to the meanings in the various dictionaries, but essentially in the context of the conditions prevailing in our country and not in other countries of the world, it is abundantly clear, that the term 'telephone' means only a public telephone and does not include an 'intercom' or an 'intercommunication telephones' exclusively used in an office.

20. Whatever be the position in other countries like United States of America, the position in our country is that telephone is synonymous to a public telephone exclusively manufactured and supplied by the ITI to the Posts and Telegraphs Department of Government that has the exclusive privilege of establishing, maintaining and working of the same under the Indian Telegraphs Act, 1885 (Central Act 13 of 1885) and does not mean an 'intercom' at all.

21. In popular sense or in common parlance, telephone in our country is always understood as a public telephone and not as 'intercom' or an internal telephone communication system or equipment exclusively used in an office. Every one of the reasons given by me earlier in ascertaining the meaning of the term 'intercom' equally apply to reject the claim of the petitioner that it is a telephone excluded by item No. 33D of the Act.

22. In advanced countries like America and Japan electronic telephones have replaced or (are) fast replacing conventional wire telephones. Electronics has already made its impact and development in our country. Electronics is one of the fastest developing industries in our country also. How soon our country will catch up with the advanced countries in all the technological developments connected with telephones or replace the conventional wire telephones with electronic 'telephones' is not a matter with which we are really concerned in this case. But, even such developments also, do not really assist the petitioner to contend that the equipment manufactured by it was a 'telephone' and not an intercom that is not exigible to duty under item No. 33D of the Act.

23. On the foregoing discussion, it follows that the equipment manufactured by the petitioners is not a telephone, but is an intercom dutiable to excise duty under item No. 33D of the Act as found by the revenue is well founded and does not call for my interference. On this conclusion, it is unnecessary to examine and decide the alternative contention urged by Sri. Bhat. But, as my order is subjected to appeal, I propose to examine the same and state my views briefly on that question also.

24. Item No. 68 residuary item; introduced by the Annual Finance Act from 1st March, 1975, makes every manufactured article that is not expressly governed by any other specific entry to excise duty under that item from that day. Assuming for purposes of argument that the equipment manufactured by the petitioner was a 'telephone' excluded from duty in item No. 33D of the Act, in such an event also, it was dutiable to excise duty under the residuary item from 1st March, 1975. Sri Rangarajan also did not rightly dispute this position.

25. In the light of my above discussion I hold that this writ petition is liable to be dismissed. I, therefore, dismiss this writ petition and discharge the rule issued in the case. But, in the circumstances of the case, I direct the parties to bear their own costs.


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