Skip to content


Deputy Commissioner of Commercial Taxes Vs. B.R. Kuppuswami Chetty - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case Revision No. 193 of 1977
Judge
Reported in[1980]45STC308(Mad)
AppellantDeputy Commissioner of Commercial Taxes
RespondentB.R. Kuppuswami Chetty
Appellant AdvocateAdditional Government Pleader
Respondent AdvocateC. Natarajan, Adv.
DispositionPetition dismissed
Cases ReferredPondicherry v. Akbar Alikhan and Abdul Ruheem
Excerpt:
- .....appellate tribunal dated 6th august, 1975. the assessee is a firm dealing in leco, firewood and charcoal. during the year 1973-74, the assessee reported total and taxable sales of rs. 19,88,896.20 and rs. 16,50,957.21 respectively. there was a dispute as to the classification of leco. according to the assessee, leco being carbonised lignite briquette was coal which is declared as goods of special importance in inter-state trade and commerce under section 14(i) of the central sales tax act, 1956, even after its amendment by act 61 of 1972 with effect from 1st april, 1973. if leco is taken as declared goods then the assessee's sales would be second sales which are not taxable. the assessing authority declined to grant this exemption, and the appellate assistant commissioner confirmed.....
Judgment:

Sethuraman, J.

1. This revision petition has been filed to revise the order of the Sales Tax Appellate Tribunal dated 6th August, 1975. The assessee is a firm dealing in leco, firewood and charcoal. During the year 1973-74, the assessee reported total and taxable sales of Rs. 19,88,896.20 and Rs. 16,50,957.21 respectively. There was a dispute as to the classification of leco. According to the assessee, leco being carbonised lignite briquette was coal which is declared as goods of special importance in inter-State trade and commerce under Section 14(i) of the Central Sales Tax Act, 1956, even after its amendment by Act 61 of 1972 with effect from 1st April, 1973. If leco is taken as declared goods then the assessee's sales would be second sales which are not taxable. The assessing authority declined to grant this exemption, and the Appellate Assistant Commissioner confirmed the assessment. The Tribunal, after going elaborately into the question of manufacture of lignite briquettes and also other aspects of the matter, came to the conclusion that leco was declared goods under Section 14(i) of the Act. In fact, the Tribunal held that leco was only lignite which is a variety of coal and which was liable to be taxed only on first sales. The short question is whether leco is coal or charcoal.

2. Section 14(i) of the Central Sales Tax Act declares coal including coke in all its forms but excluding charcoal as being of special importance in inter-State trade and commerce. The Second Schedule of the Tamil Nadu General Sales Tax Act, 1959, contains a description of declared goods in respect of which a single point tax alone is leviable under Section 4. The relevant entry therein runs as follows:

Coal, including coke in all its forms, but excluding charcoal.

3. Therefore, what is sought to be excluded from coal is- only charcoal. The Sales Tax Appellate Tribunal has referred to Volume I of Book of Popular Science and at page 408 of the said book it is stated:

There are four chief ranks, or types of coal. Ranging in the order of their development from peat, they are lignite, subbituminous coal, bituminous coal and anthracite. The four ranks are not clearly distinguished from one another; their composition may vary widely in different places.

The lowest rank of coal, lignite, shows more or less clearly the structure of the original plant matter, including the woody element. That is how it gets its name; for 'lignum' means 'wood' in Latin. Lignite has the lowest percentage of fixed carbon and the highest content of volatile matter and moisture of all the four ranks. It ranges in colour from light brown to very dark brown. The light brown variety is sometimes called brown coal.

4. Accepting the above meaning, the commodity in question was taken to be coal and not charcoal. The Government of India at the request of the State Government of Tamil Nadu clarified the issue as to whether lignite was coal. The clarification is as under:

I am directed to refer to your letter No. 31204/ST/Sp1. 1/62-4 dated 23rd May, 1962, on the above subject and to say that this Ministry has been advised that 'coal' as defined in the Central Sales Tax Act, 1956, would include 'lignite' also.

This Ministry has also been advised that the lignite briquettes would fall within the scope of the term 'coke' used in the Act.

5. This communication was circulated by the State Government through the Board of Revenue and the communication dated 25th June, 1963, ran as under:

In continuation of the Board's reference second cited, I am to state that the lignite and lignite briquettes will come under item 1 of the Second Schedule liable to tax at 2 per cent single point under the Madras General Sales Tax Act, 1959. Consequent on the amendment of the Central Sales Tax Act, 1956, enhancing the concessional rate of the Central sales tax from 1 per cent to 2 per cent with effect from 1st April, 1963, the rate of Central sales tax on sales of lignite and lignite briquettes is 2 per cent with or without C or D forms.

6. The result of these communications or clarifications is to show that coal finding a place under Section 14 as well as in the Second Schedule would include lignite and lignite briquettes. However, in spite of receipt of these communications, the authorities have felt free to go into the question as if these circulars are not binding on them. It is unnecessary for our present purpose to examine as to how far these authorities are justified in going beyond these circulars.

7. Even as a matter of understanding of the meaning of the word 'lignite' we may refer to the 'McGraw-Hill -- Dictionary of Scientific and Technical Terms', where the meaning of 'lignite' is given as

Coal of relatively recent origin, intermediate between peat and bituminous coal; often contains patterns from the wood from which it formed.

8. It is treated as a category of coal.

Coke is shown as meaning:

A coherent, cellular, solid residue remaining from the dry (destructive) distillation of a coking coal or of pitch, petroleum, petroleum residues, or other carbonaceous materials; contains carbon as its principal constituent, together with mineral matter and volatile matter.

9. This is a category of coke in the sense of carbonaceous material.

The meaning of charcoal is given as

A porous solid product containing 85-98 per cent carbon and produced by heating carbonaceous materials such as cellulose, wood, or peat at 500-600C in the absence of air.

The residue obtained from the carbonization of a noncoking coal, such as subbituminous coal, lignite, or anthracite.

10. Lignite in some context, e. g., in science may be treated as charcoal. But that is not the meaning here. Thus though the dictionary meaning of the word 'lignite' would comprehend its characterisation along with charcoal, still in view of the fact that lignite is only a form of coal, as commercially understood, or even scientifically understood, it is manifest that lignite was not intended to be excluded. Otherwise, the entry would have been worded differently so as to exclude lignite. We may also point out that what we are concerned here is briquette and leco which is now marketed is a kind of lignite which goes into the process of making lignite briquette. Therefore, it is only a product or transformation of lignite and, as lignite, it comes within the category of coal, and unless excluded from the said category it has to be classified only as coal.

11. Reference was made to a decision of this Court in Deputy Commissioner (Sales Tax), Pondicherry v. Akbar Alikhan and Abdul Ruheem & Co. [1971] 27 S.T.C. 167. In that case exemption was granted under item 18 of the Third Schedule from tax on products such as firewood and charcoal. The question was whether leco could be classified as charcoal so as to be eligible for the exemption. At page 169, the learned Judges pointed out:

In the instant case, it is common knowledge that leco, which is an expression which is of recent origin, has never been understood as anything otherwise than as domestic fuel. The learned Government Pleader concedes that there is no other user of leco otherwise than as combustible material used as charcoal. Such is the popular and commercial understanding of the expression. The learned Tribunal rightly relied upon the elucidation of the product as given by the Neyveli Lignite Corporation Ltd., in its letter dated 12th September, 1969. Therein, the corporation says that leco is produced from lignite by a process of briquetting and carbonisation, and that leco is a product obtained from lignite after a certain process and after certain substances are extracted from it, such as phenyl, tar and linoleum, etc. Thus, it is clear that even the manufacturer of this new product has understood it and treated it as fuel corresponding to charcoal. In the light of the pronouncement of the Supreme Court under similar circumstances and in view of the factual situation that leco in common parlance is fuel, we are unable to appreciate as to how and in what respect the order of the Tribunal is wrong.

12. As may be seen from the facts in the case there was actually a concession that leco was not used otherwise than as combustible material such as charcoal. As it was equated to charcoal the court had not to go into the question whether lignite fell within the category of charcoal or not. The entry in the Second Schedule or Section 14 of the Central Sales Tax Act had not to be construed by the learned Judges in that case. We do not, therefore, find anything in the said decision which requires us to take a view different from what we have earlier expressed. We may also point out that the process which goes to the manufacture or making of lignite briquette is the same as employed for the purpose of obtaining coke and that is how the Central Government had understood lignite briquettes as coming within the scope of the term coke used in the Act. We do not consider there is any error in the manner in which it was understood by the communication of the Central Government. The word 'charcoal' has thus to be taken only in its popular sense of carbonised wood or timber. The result is the revision petition fails and is accordingly dismissed with costs. Counsel's fee Rs. 250.


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