Skip to content


State of Madras Vs. Harshkant S. Mehta - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 181 and 182 of 1967
Judge
Reported in[1973]31STC365(Mad)
AppellantState of Madras
RespondentHarshkant S. Mehta
Appellant AdvocateK. Venkataswami, Adv. for ;Special Government Pleader
Respondent AdvocateT. Srinivasamurthy, Adv.
DispositionPetition dismissed
Cases Referred and Deputy Commissioner (S.T.) v. Akbar Alikhan and Abdul Ruheem
Excerpt:
- .....a precious stone is normally a gem stone noted for its rarity, beauty, lustre, hardness and high value. diamond is a mineral compound solely of carbon and it is the hardest of all known substances. its optical properties give it a beauty that makes it desirable as a gem. industrial diamond is a by-product of gem industry and somewhat of low grade diamond without the requisite optical properties so as to make it a gem. though the most distinctive characteristic of diamond is hardness and its hardness makes it valuable as an industrial tool, it has not the other properties of a gem stone. as the diamond crystal is not equally hard in all directions, the crystal is set singly for use in cutting tools. but gem diamonds are crystals cut and polished with many facets and are graded and.....
Judgment:
ORDER

Ramanujam, J.

1. The assessee in these cases is a dealer in industrial diamonds. Taking the view that industrial diamonds would fall under item 30 of Schedule I of the Madras General Sales Tax Act, 1959 (hereinafter called the Act), the assessing authority determined the taxable turnover of the assessee for the year 1960-61 at Rs. 6,000 and for the year 1962-63 at Rs. 5,600 and brought the said turnovers to tax at 3 per cent. single point. The assessing authority also levied a penalty of Rs. 270 for the year 1960-61 and Rs. 252 for the year 1962-63 under Section 12(3) of the Act on the ground that the assessee had not submitted his turnover for the years in question.

2. The assessee went in appeal and the appellate authority affirmed the assessment on the turnovers in question for the two years but reduced the penalty from Rs. 270 to Rs. 135 for the assessment year 1960-61 and from Rs. 252 to Rs. 126 for the assessment year 1962-63. There were further appeals to the Tribunal and the Tribunal had taken the view that industrial diamond will not fall within item 30 of Schedule I to the Act and that it will be assessable only at multi-point at the rate of 2 per cent. under Section 3(1) of the Act. In that view it set aside the assessments as the turnovers in dispute were below the taxable limit of Rs. 10,000. Consequently, the Tribunal also set aside the orders of the authorities below levying penalty.

3. In these tax cases the State contends that industrial diamonds would fall within item 30 of Schedule I to the Act and that the view taken by the Tribunal is erroneous. Item 30 of Schedule I to the Act runs as follows :

'Precious stones, namely, diamonds, At the point 3 peremeralds, rubies, real pearls and sapphires, of first sale cent.'whether they are sold loose or as forming in the State.part of any article in which they are set.

4. It is clear from the item set out above that diamonds, emeralds, sapphires, rubies, real pearls, etc., are only descriptive of the article referred to earlier, namely, 'precious stone'. Therefore, it cannot be said that diamonds of all types whatever will be taken in by that item. It is only those diamonds which will come under the definition of 'precious stones' which will be covered by that item. So it is necessary to find out the scope of the words 'precious stones'. 'Precious stone' is defined in various English dictionaries as hereunder :

(1) The Shorter Oxford English Dictionary : 'A gem'. (2) Webster's Dictionary: 'A rare and costly gem'. (3) Chambers's Dictionary : 'A stone of value and beauty for ornamentation; a gem or jewel'. (4) 'Reader's Digest Encyclopaedia Dictionary : 'Gem'.

5. From the above definitions of precious stone, it is manifest that a precious stone must be a gem of value and beauty used for ornaments and it is only such diamonds, emeralds, rubies, pearls and sapphires, which are gems of value and beauty that will come under the definition of 'precious stone' referred to in item 30 to Schedule I. It is not disputed that industrial diamonds are never used for ornaments and that they are fitted in tools and implements used for cutting and drilling, etc. It is neither a stone of such value and beauty as could be used for ornamentation, nor can it be called a gem or a jewel. The price of industrial diamond ranges only between Rs. 20 to Rs. 30 per carat while diamond as a precious stone would cost from Rs. 1,000 to Rs. 3,000.

6. According to the revenue, industrial diamond is also a diamond and would fall within the words 'precious stone'. Reference is made to certain departmental instructions contained in the 'Commercial Tax Gazette, Volume I', for the quarter ending 30th September, 1963 [item 18 under Section (f) at page 26]. The instruction contained in item 18 is to the effect that the rate of tax in respect of industrial diamonds is 3 per cent. single point on the diamond portion of the sale value of the tool and two per cent multi-point on the remaining portion from 1st April, 1961 and that for the period from 1st April, 1959, to 31st March, 1961 the value of the entire tool was liable to tax at three per cent single point. But, for construing the scope of item 30 of Schedule I, the said instruction cannot be conclusive, as that will only show as to how the Government or the departmental authorities construed that item. The construction put upon a particular item by the departmental authorities, though may be of some assistance in the interpretation of the item, such interpretation cannot bind the court.

7. We are of the view that the use of the word 'namely' after the words 'precious stones' indicates that what comes after that word is only illustrative or descriptive of the words 'precious stones'. Therefore, even though industrial diamond may in one sense be called a 'diamond' because it comes from the very genus, it cannot be taken as a precious stone as normally understood in commercial circles. The collocation and the setting in which the words, 'diamonds, erneralds, rubies, pearls, etc.,' have been used show that it is only precious stones which are used for the purpose of ornamentation that will come under that item. A precious stone is normally a gem stone noted for its rarity, beauty, lustre, hardness and high value. Diamond is a mineral compound solely of carbon and it is the hardest of all known substances. Its optical properties give it a beauty that makes it desirable as a gem. Industrial diamond is a by-product of gem industry and somewhat of low grade diamond without the requisite optical properties so as to make it a gem. Though the most distinctive characteristic of diamond is hardness and its hardness makes it valuable as an industrial tool, it has not the other properties of a gem stone. As the diamond crystal is not equally hard in all directions, the crystal is set singly for use in cutting tools. But gem diamonds are crystals cut and polished with many facets and are graded and priced according to perfection, colour, cutting and size. It is the cutting which brings out the best features of a diamond and makes it a gem. Industrial diamond, on the other hand, has no lustre, brilliance or beauty though it may have the same hardness as a gem stone. It is practically of very little value and not a rarity. It can never by used as an ornament. The value of precious stone depends largely on four factors, beauty, rarity, durability and to some degree the dictates of vogue. To import the choice as an object of personal adornment it must be beautiful and also durable. But, however, unless these attributes of beauty and durability are combined with rarity its value will not be high. The properties of precious stones determine their suitability and desirability for use as gems and gems take for their beauty on the properties of brilliance, dispersion, colouring and lustre. An industrial,diamond has got only one of the properties of a diamond as a precious stone that is, hardness. But merely because industrial diamond has got one of the many characteristics of a precious stone, it cannot be said to be a gem stone or a precious stone.

8. The learned counsel for the revenue relies on the decisions in Commissioner of Sales Tax v. Jaswant Singh Charan Singh [1967] 19 S.T.C. 469, Sarin Chemical Laboratory v. Commissioner of Sales Tax [1970] 26 S.T.C. 339 and Deputy Commissioner (S.T.) v. Akbar Alikhan and Abdul Ruheem & Co. [1971] 27 S.T.C. 167, in support of his contention that in a taxing statute the popular meaning or the commercial under-standing of the words should prevail in spite of the technical meaning that the words might secure by the application of the principles of geology, physics and chemistry. But in this case, the popular and commercial meaning given to the word 'diamond' will not, in our view, take in industrial diamond, for the word 'diamond' is normally attributed in the commercial circles to that used as a gem stone in an ornament. Normally when we go to a jeweller and ask for a diamond he would not show an industrial diamond. Therefore, in the commercial world industrial diamond has got a separate connotation from the diamonds which are used as gem stones for ornaments. In our view, the Tribunal has come to the correct conclusion in these cases. The tax cases are, therefore, dismissed with costs. Counsel's fee Rs. 150 (one set).


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //