1. Section 3 of the U.P. Sales Tax Act imposes a tax on the sale of goods. Section 3-A (1) empowers the State Government to notify that the turnover in respect of any goods or class of goods shall be liable to tax at such single point in the series of sales by successive dealers as it may specify in the notification. Section 3-A (2) empowers the Government to fix the rate of tax not exceeding the maximum mentioned therein.
2. Acting under Section 3-A, the Government issued a notification on March 31, 1956. Head 7 of the notification specifies 'chemicals of all kinds.' According to the notification, sales of chemicals of all kinds, which are manufactured in Uttar Pradesh, shall be liable to tax at the point of sale by the manufacturer and in case of goods imported from, outside U.P., at the point of sale by the importer.
3. The opposite party is a manufacturer of, and dealer in, sodium silicate and washing soap. In the assessment year 1958-59 the opposite party admittedly sold sodium silicate manufactured by it for Rs. 98,028,000. The Sales Tax Officer treated sodium silicate as a chemical and charged sales tax in accordance with the aforesaid notification. His order was affirmed in appeal. But the Judge (Revisions) reversed his decision. He took the view that sodium silicate was not a chemical. But at the instance of the Commissioner, Sales Tax, the applicant has referred to this Court this question:
'Whether sodium silicate as used in the manufacture of soap is included in 'chemicals of all kinds' appearing at item 7 of the notification ........... dated 31-3-1956.'
4. A Division Bench of this Court has already given an affirmative answer to thisquestion in the Commissioner of Sales Tax v. Banaras Chemicals, 1967-20 STC 246 (All). But the present reference was made before this decision. Counsel for the opposite party has strenuously urged before us that sodium silicate is not a chemical and has requested us to reconsider the decision. But I am quite certain in my mind that Banaras Chemicals, 1967-20 STC 246 (All) is rightly decided.
5. At this stage it is proper to touch upon a minor matter. It seems to me that the reference to the manufacture of soap in the question is wholly immaterial. The opposite party is admittedly a manufacturer of, and a dealer in, sodium silicate. It has admittedly sold sodium silicate to buyers in the relevant assessment year. So the material question is whether sodium silicate is a chemical. If it is a chemical within the meaning of that term as used in the notification, it will also be a chemical even when it is used in the manufacture of soap.
6. According to the Judge (Revisions) sodium silicate is not a chemical. He says:
'I interpret the word 'chemical' in relation to its common use and purpose. Sodium silicate, which is commonly known as water-glass, is never used in any chemical process or chemical industry. It is used as a filler in cheap soap manufacture. The addition of sodium silicate only increases the weight of the soap without in any way adding to the detergent property of the soap. It is purely a mechanical process.'
7. In his arguments before us counsel for the opposite party has given only a lukewarm support to this passage. He has now turned the focus on a new argument. He has tried to reinforce this argument from books on science. The argument proceeds in this way: a chemical, in its true scientific sense, is a substance of definite and known composition. Sodium silicate is a compound of sodium and silicate. Its formula is somewhat indefinite. The formula varies between Na2 Sio2 and Na2 Sio4. Accordingly it is not a chemical.
8. I am unable to accept this argument for more than one reason. One, we are required to construe the word 'chemical' as used, not in a book of science, but in a notification issued under the Sales Tax Act. One of the primary purposes of modern science is simplicity in the formulation of the laws governing nature. This simplicity finds expression in definite and exact formulae. The scientist believes that every detailed occurrence can be correlated with its antecedents in a perfectly definite manner. (But he is for the present baffled by the anarchy the quantum phenomenon). The purpose of a Sales Tax Law, on the other hand, is the collection of revenue, and with that end, to classify goods according to theusage in trade and commerce. Again a fiscal enactment is generally marked by complexity. This complexity is the result of compromise of various competing claims and practical considerations such as convenience and despatch in the levy and collection of taxes. It is accordingly not wise to demand scientific simplicity (or definiteness) in a Sales Tax enactment
9. Two, scientific definitions are now becoming more abstract and more divorced from common understanding. Hence the word 'chemical' should not be interpreted according to the true scientific definition. 'The word 'chemical', however, as used in a constitutional exemption from taxation of capital and machinery employed in the manufacture of chemicals, is to be understood not from a scientific point of view, but in its generally accepted meaning ........,......' (Words and Phrases (Permanent Edition) Vol. 6, page 740).
10. In Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh, 1967-19 STC 469 = (AIR 1967 SC 1454), the Supreme Court observed:
'But it is now well settled that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to thescientific or the technical meaning of suchterms but to their popular meaning or'the meaning attached to them by thosedealing in them, that is to say, to theircommercial sense'.' (Emphasis mine herein ' ')
11. In His Majesty the King v. Planters Nut and Chocolate Company Limited, 1951 CLR (Ex) 122, Cameron, J. said: 'The object of the Excise 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.'
12. In Avadh Sugar Mills Ltd. v. Sales Tax Officer, 1968-21 STC 295 (All), I said 'Words are signals invented by a society to facilitate the communication of ideas and things between signaller at one end and the receiver at the other end. The gradual acquisition of a conventional meaning is necessarily inherent in the social (or group) purpose of their inventions. The interpreter should therefore, give due emphasis to the social setting of a word. The real meaning often is wrapped up in the sociology of a word.'
13. Three, the definition relied on by counsel is not the solitary scientific meaning of the word 'chemical'. It is also defined as 'pertaining to chemistry' (2). This is indeed the popular meaning of the word. And by this definition, sodium silicate will be classed as a chemical.
14. In sum, having regard to the differing purposes and differing environments of science and Sales Tax Act and two meanings of the term 'chemical' in science itself I cannot persuade myself to agree that the term should be given the stricter meaning. On the other hand, having regard to the principles of interpretation concerning Sales Tax Acts, the word should be construed in the commercial sense. And so construed, it will certainly comprehend sodium silicate. Sodium silicate is described under the heading of inorganic compounds-in the Handbook of Chemistry and Physics. (3) It is mentioned under the heading of 'Fine and Pharmaceutical Chemicals' in the General Catalogue issued by E. Merck (4) under the heading of 'Organic and Inorganic Chemicals for Laboratory Use' in the Laboratory Chemicals Catalogue issued by the British Drug Houses Ltd., (5) and under the heading of 'Organic and Inorganic Chemicals' in the Catalogue issued by Vora Brothers, (6).
15. It is manifest from these catalogues that sodium silicate is regarded as a chemical by dealers in chemicals in the U.S.A., Germany, England and India. Their opinion is in accord with the dictionary meaning of the word 'chemical' According to Shorter Oxford Dictionary 'chemical' means anything obtained or used in chemistry. The word has been judicially construed in the U.S.A. There it means a substance used for producing a chemicle effect or produced by a chemical process. Judged by these meanings sodium silicate is a chemical for it is produced by fusing together sodium carbonate and silicate.
16. The passage which I have extracted from the decision of the Judge (Revisions) shows two errors in his reasoning. Firstly, the use of a substance in a chemical process or chemical industry is not the sole test of it being a chemical. I do not know if lithnem bicarbonate is used in any chemical process or chemical industry but it is undisputedly a chemical. Secondly, he is also wrong in thinking that sodium silicate is not used as a detergent in soap industry. These errors areadequately exposed in the Banaras Chemical's case. 1967-20 STC 246 (All) and it is not necessary to repeat what has already been said there.
17. I have already pointed out the flaw in the question referred to us. I shall accordingly reframe the question as follows:--
'Whether sodium silicate is included in 'chemicals of all kinds' in Item No. 7 of Notification No. ST-905/X, dated March 31, 1956?'
18. My answer to the question, so re-framed, is in the affirmative.
19. The assessee manufactures and deals in sodium silicate and washing soap. He was assessed to sales tax for the assessment year 1958-59 on a turnover of sodium silicate amounting to Rs. 98,028,00. The turnover was taxed at the rate of one anna per rupee on the footing that sodium silicate fell under the head 'chemicals of all kinds' appearing at Item No. 7 of Notification No. ST-905/X, dated March 31, 1956. The Assistant Commissioner (Judicial) Sales Tax, on appeal by the assessee took the same view. But the Additional Revising Authority, Sales Tax, exercising his revisional jurisdiction, held that sodium silicate is not a chemical when used in the soap industry. At the instance of the Commissioner of Sales Tax this reference has been made on the following question:
'Whether sodium silicate as used in the manufacture of soap is included in 'chemicals of all kinds' appearing at Item 7 of the notification No. ST-905/X dated March 31, 1956?'
20. A similar question was raised in 1967-20 STC 246 (All) where a Division Bench of this Court expressed the view that sodium silicate was a chemical within the meaning of the entry in the aforesaid Notification. When the present reference came before a Bench consisting of two of us (Pathak and Gulati, JJ.) it was urged that as the question framed is limited to the use of sodium silicate in the manufacture of soap, then having regard to that use it must be held that sodium silicate is not a chemical. As it appeared, on the submissions then made, that the point decided in Banaras Chemicals, 1967-20 STC 246 (All) (Supra) called for further consideration the case was referred to a larger Bench.
21. Section 3 of the U.P. Sales Tax Act charges tax for each assessment year on the turnover of every dealer at the rate specified therein. Section 3 is open to a construction under which every sale of an article in a series of sales by successive dealers attracts the tax. Section 3-A was then enacted. It empowers the State Government to specify that the tax will be levied only at such single point in the series of sales by successive dealers as the State Government may specify. It confers the further power upon the State Government to declare the rate of tax in respect of such turnover. Under Section 3-A the State Government made Notification No. ST-905/X, dated March 31, 1956, declaring the single point at which the turnover of certain goods would be liable to sales tax and further declaring that the rate of tax would be one anna per rupee. The goods were specified in a List made part of the Notification. As examination of the List shows that some entries refer to specific commodities, such as 'cigars, cigarettes and pipe tobacco', while other entries mention a general head or class of goods capable of including a number of commodities falling within it, as for example 'electrical goods' and 'jute goods'.
22. Not infrequently, the question arises whether a commodity sold by a dealer can be said to be covered within an entry in the Notification. The principles on which the question must be resolved are, I think, now well settled. The U.P. Sales Tax Act provides for the levy of a tax on the sale or purchase of goods. The tax is levied on a dealer, and a 'dealer' has been defined by Section 2 (c) of the Act as a person buying or selling goods. I think it to be beyond dispute that as the U.P. Sales Tax Act is a fiscal statute providing for the levy of a tax on the dealer, reference to the goods or class of goods mentioned in the sections of the Act or the Notification made under it must be understood in the sense in which a dealer carrying on the business of buying or selling those goods would understand it. What is relevant is how such reference should be understood in the commercial sense.
23. In Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, AIR 1961 SC 1325 = 1962-1 SCR 279 the Supreme Court, considering whether betel leaves were 'vegetables' within the meaning of that expression in the Schedule to the C. P. and Berar Sales Tax Act, 1947, held that the expression 'vegetables'.
'..........must be construed 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 construed 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 understood as used in common language.'
The Court held the expression 'vegetables' to refer to the class of vegetables which are grown in a kitchen garden or in a farm and are used for the table. Reference was made by the Supreme Court to 1951 CLR (Ex) 122 where Cameron, J. of the Exchequer Court of Canada observed:
'......... the rule is that the particularwords used by the Legislature in the denomination of articles are to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense, 'for the Legislature does not suppose our merchants to be naturalists, or geologists, or botanists.' .................. A perusal of theconsumption or sales tax sections of the Act (Part XIII) and of the list of exemptions set out in Schedule III is sufficient to indicate that Parliament, in enacting the sections and the schedule, was not using words which were applied to any particular science or art, and that, therefore, the words used are to be construed as they are understood in common language. To the words 'fruit' and 'Vegetables', therefore, there must be given the meaning which they would have when used in the popular sense -- that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. 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 it as 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 'Vegetables' 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.'
24. The point was considered recently by the Supreme Court in AIR 1967 SC 1454 and the Supreme Court reiterated that while interpreting items in statutes like the Sales Tax Acts resort must 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.
25. So, how is the entry 'chemicals of all kinds' in the Notification of March 31, 1956 to be construed? It is to be construed in its commercial sense, that is, according to the general usage and known denominations of trade. It is the sense in which a dealer carrying on the business of selling chemicals and a purchaser buying them would understand the expression 'chemicals of all kinds'. A dealer selling chemicals offers them for sale because he considers them saleable. They are saleable because they can be the subject ofuse of consumption or profit to a prospective buyer, and that depends upon their properties. A commodity is offered for sale as a chemical because of its chemical properties. Therefore, the entry 'chemicals of all kinds' refers to those commodities which because of their chemical properties prompt a dealer to offer them for sale and induce a purchaser to buy them,
26. It has been contended that a commodity is a chemical if it is the product or result of a chemical process or a chemical reaction. It seems to me that while that test may afford a basis to the chemist or scientist for the purpose of classifying a substance it would hardly be relevant in an activity where the primary actors, a dealer selling and a purchaser buying, are principally interested in its properties.
27. In Thorpe's Dictionary of Applied Chemistry (7) the varied uses of which sodium silicate is capable have been outlined. It is pointed out that the adhesive properties of sodium silicate solutions are similar to those of many organic colloids and have the advantages of being odourless, heatproof and of becoming eventually insoluble. The cardboard and paper industries use sodium silicate for production of corrugated and high finished printing papers. The textile industry also makes extensive use of sodium silicate. When used for silk-wetting, the silicate strengthens the fibre of the article. Mercerising of cotton is found to be improved by substituting sodium silicate for sodium hydroxide. Many articles of clothing are treated with silicates to reduce fire hazard. Its adhesive and wetting properties allow the use of sodium silicate as a binding material for numerous materials. It is used as a mordant and fixing agent in the dyeing and printing industry, and as a constituent of lead-free enamels for glazing pans. Small water systems can be protected from corrosion by sodium silicate. It is now finding application in the welding and degreasing industries. Plastics from sodium silicate and phenol, suitable for coating paper and cloth, have been made. As an anti-pyrogenic in coal mines, sodium silicate is used in conjunction with calcium chloride and sodium bicarbonate in decreasing the oxygen absorbed by coal dust. A familiar domestic application of sodium, silicate is its use as an egg preservative. Sodium silicate may be used in medicine as a therapeutic against tuberculosis. The use of sodium silicate in the soap industry is well established. During the Second World War its use for this purpose was greatly increased owing to the shortage of fats. It not only replaces the fat, but in some respect improves the quality of the soap. It is nearly always used whenever an inorganic detergent is required.
28. It may be possible to say that the detergent action of sodium silicate may be attributed to its physical properties rather than to its chemical properties and, therefore, in that sense, when used in the manufacture of soap it may not be regarded as a chemical. But that is not the only use to which sodium silicate is employed commercially. It is capable of a large number of uses, some of which have been mentioned above, and it is apparent from what has been said above that it has many chemical qualities which make it a valuable commodity for sale in the market. The Additional Revising Authority limited the enquiry to the application of sodium silicate in the manufacture of soap. In my opinion, he was not justified in doing so. Whether a commodity can be described as a 'chemical' for the purpose of the entry in the Notification must be determined not by the use for which a particular purchaser buys it but with reference to the general properties which make it saleable to the entire range of prospective buyers. Upon that view of the matter, sodium silicate, in my opinion, is a chemical within the meaning of the expression 'chemicals of all kinds' mentioned at item No. 7 in the Notification No. ST-905/X, dated March 31, 1956.
29. I reframe the question as follows:
'Whether sodium silicate is included in'chemicals of all kinds' appearing at ItemNo. 7 of Notification No. ST-905/X, dated31-3-1956?'
and answer the question so reframed inthe affirmative.
30. The Commissioner of Sales Tax is entitled to his costs, which I assess at Rs. 100. Counsel's fee is assessed in the same figure,
31. I have had the advantage of reading the judgment prepared by brother Dwivedi, J. While I agree with the final answer to the question proposed by brother Dwivedi, I feel it necessary to add a few words by way of elucidation.
32. The question which has been referred to us for our opinion reads thus:
'Whether Sodium Silicate as used in the manufacture of soap is included in 'chemicals of all kinds' appearing at item 7 of the notification dated 31-3-1956.'
33. The question as framed is not as to whether sodium silicate is a chemical, but whether sodium silicate would be a chemical when used in the manufacture of soap. The answer to this question would depend upon as to whether sodium, silicate when used in the manufacture of soap undergoes or brings about a chemical process. This is purely a technical question. A chemical process must necessarily involve a chemical change or a chemical reaction represented by a chemical equation resulting in the production of achemical compound. All these are technical terms. In the Concised Dictionary of Sciences by F. Gaynor some of thesetechnical words have been denned as under:
'A rearrangement of atoms or molecules intochemically different structures, the substancesundergoing such a change as to lose their original identity.'
'Any chemical change or transformation ofmolecules of one kind into molecules of anotherkind brought about by the rearrangement of atoms when two or more elements orcompounds are brought into contact under given conditions.'
'A symbolic representation of a chemicalreaction showing the relationbetween the substances and theirproducts, e,g. Zn+2HCL=Zinc Chloride+Hydrogen,'
'A process in which an atom of a certain chemical substances exchanges place with a similar atom in adifferent substance.'
'A substancecomposed of two or more elements combined in definite proportions fay weight,the individual properties of the constituents having disappeared and the laterbeing inseparable by physical means.'
34. Sodium silicate, in the manufacture of soap, is used either as a filler or as a detergent or both. It undergoes no chemical process, brings about no chemical change nor does it produce any chemical compound. The part that it plays in the manufacture of soap is purely mechanical.
35. In Thorpe's dictionary of Applied Chemistry' it is mentioned:
'The detergent action is a mechanical process by which dirt is removed by detergent solution which becomes attached to the oil globules and helps them float off the fibre.'
Obviously, therefore, the question as framed is capable of only one answer, namely, that sodium silicate is not a chemical when used in the manufacture of soap.
36. In (1967) 20 STC 246 (All) the question was identically worded and the answer, to that question could not have been in the affirmative. That is why I and brother Pathak felt that the case of the Benaras Chemicals, 1967-20 STC 246 (All) (Supra) requires reconsideration.
37. But, sodium silicate has variety of uses and its use in the manufacture of soap as a filler or detergent is only one of its uses. Item No. 7 of notification No. S. T. 905/X dated 31st March, 1956 contains no reference to the use of a particular chemical. The real question, therefore, was as to whether sodium silicate would fall within the expression 'chemicals of all kinds' as occurring in the notification of March 31, 1956. A question like that could not be circumscribed as has beendone in the instant case. The meaning given to sodium silicate should be such as would be applicable in all circumstances, otherwise the result would be that sodium silicate would be a chemical in one case, but it would not be a chemical in another case. That would not be the correct way of answering a question of this nature. I therefore, agree with brother Dwivedl that the question should be refrained so as to exclude therefrom the reference to the use of sodium silicate in the manufacture of soap.
38. Now, the U.P. Sales Tax Act is concerned primarily with the (business community because) it seeks to levy tax on the total sales during a year of a dealer which, according to the definition given in the Act, means a person who carries on the business of buying and selling goods. Any entry In a notification issued under the U.P. Sales Tax Act, therefore, has to be interpreted in a sense in which it would be understood in the commercial world. I am, therefore, of opinion that the expression 'chemicals of all kinds' has to be given not any technical or scientific meaning but a meaning which this term has in the commercial world. The term 'chemical' according to the books of chemistry has a very wide connotation inasmuch as anything that pertains to chemistry is regarded as a chemical. But that obviously is not the sense in which this term has been used in the notification in question because otherwise articles like gold, silver, iron and even plain water would be chemicals whichadmittedly are not regarded as chemicals in the popular sense.
39. The assessee M/s. Prayag Chemical Works, as its name suggests, is a dealer in chemicals. It deals in imported sodium silicate and also manufactures in its own factory sodium silicate which is popularly known as 'soda silicate'. Sodium silicate is manufactured by fusing together sand and soda-ash under high temperature. This process is definitely chemical, even though the chemical composition of the resultant product viz., sodium silicate is not always uniform; but that is immaterial because having a fixed chemical composition is not the only attribute of a chemical. From the order of the Judge (Appeals) dated 10-4-1961 it appears that the assessee admitted before him that it manufactures sodium silicate by chemical process. According to one of the definitions of the word 'chemical' any substance which is produced by a chemical process is regarded as a chemical. As already stated above, the assessee manufactures sodium silicate by chemical process and sells it as a chemical. The mere fact that sodium silicate does not take part in a chemical reaction in the manufacture of soap does not make it anytheless chemical. I would, therefore, reframe the question to read:
'Whether sodium silicate is included in 'chemicals of all kinds' appearing at item No. 7 of notification No. S. T. 905/X dated 31st March, 1956.'
and would answer it in the affirmative.
40. Our answer to the question, as reframed by us, is in the affirmative.
41. The Commissioner, Sales Tax, shall get costs which we assess at Rs. 100. Counsel's fee is assessed in the same figure.