Judgment · High Court · 2012

By this application under article 226 of the Constitution of Ind ia, petitioner challenges the decision of the revenue authorities of the State i n treating Bentonite as a chemical and taxing the same as a residuary item attra cting tax @ 12.5% under the Assam Value Added Tax Act, 2003. Consequently, the a ssessment order dated 30-03-2009 for the assessment year 2005-06 as affirmed by the revisional authority and by the Assam Board of Revenue in appeal have been p ut to challenge.

#2. The facts of the case may be briefly noted. Petitioner is a proprietorship concern engaged in the business o 3. f purchase and sale of Acids, Chemicals, Minerals, Bentonite etc. Petitioner is a registered dealer under the Assam Value Added Tax Act, 2003 (VAT Act). For the assessment year 2005-06, petitioner submitted monthly tax returns alongwith due payment of tax as per the said returns. During the said year, petitioner affect ed sale of Bentonite to the extent of Rs. 7,10,815/- and paid 4% VAT thereon, be ing covered by item Nos. 45 and 72 of the second schedule Part-A General to the VAT Act, which furnishes a list of goods taxable at 4%. Description of the item against entry No.45 is (cid:28)ores and minerals (cid:29) and against entry No.72, it is (cid:28)clay including fire clay (cid:29).

#4. The jurisdictional Superintendent of Taxes made audit assessment under section 36 of the VAT Act. In the assessment order dated 30-03-2009, the assessing officer referring to a circular dated 05-01-2006 of the Commissioner o f Taxes, Assam, held that the item Bentonite is taxable at 12.5% instead of 4% w hich the dealer had paid. The assessable turnover was worked out accordingly. It may be mentioned that as per the circular dated 05-01-2006, Bentonite powder wa s held to be a chemical and not as clay on the basis of Gujarat High Court deci sion in the case of Vijay Foundry and Machinery Works -Vs- State of Gujarat re ported in 84 STC 152. It was further held that since Bentonite powder was an unc lassified item, it would be taxable under the entry at Serial No.1 of the fifth schedule to the VAT Act @ 12.5%.

#5. Petitioner filed revision petition before the Commissioner of Ta xes against the aforesaid assessment order contending that the rate of tax in ca se of Bentonite should have been 4% as per entry 45 or 72 of the second schedule to the VAT Act instead of being charged at 12.5% as a residuary item under entr y 1 of the fifth schedule to the VAT Act. However, the revisional authority by t he order dated 01-08-2009 upheld the order of the assessing officer based on the departmental circular, which in turn was based on the decision of the Gujarat H igh Court in the case of Vijay Foundry holding that Bentonite clay is not a mine ral and, therefore, couldnot be brought under entry 45 or 72 of the second sched ule to the VAT Act. As Bentonite clay is not enlisted as a specific item, it was correctly treated as a residuary item which is taxed at a higher rate.

#6. Petitioner preferred appeal before the Assam Board of Revenue, w hich was registered as Case No.39 STA/2009. By the judgment and order dated 13-1 0-2010, the Board of Revenue upheld the orders of the departmental authorities b ased on the Gujarat High Court decision in Vijay Foundry and dismissed the appea l.

#7. Aggrieved, petitioner has filed the present writ petition. We have heard Mr. GK Joshi, learned Senior Counsel assisted by M 8. r. RK Joshi, learned Counsel for the petitioner as well as Mr. S.Saikia, learned Standing Counsel, Finance Department for respondents 1 to 4. Mr. GK Joshi, learned Senior Counsel appearing for the petitione 9. r submits that the Gujarat High Court decision in Vijay Foundry is clearly disti nguishable on facts as under the Assam Minor Mineral Concessions Rules, 1994, Be ntonite is classified as a minor mineral. Consequently, Bentonite would be cover ed by the specific entries 45 and 72 of the second schedule to the VAT Act. Ther efore, there is no scope for treating Bentonite as a residuary item under the fi fth schedule to the VAT Act which attracts higher tax @ 12.5%. In support of his submissions, learned Senior Counsel has referred to and relied upon the followi ng decisions :- 140 STC 17 State of Maharashtra -Vs- Bradma of India Limited Hindustan Poles Corporation -Vs- Commissioner of Central Excise, Calcutta 145 STC 626 (2011) 4 SCC 386 Commercial Taxes Officer -Vs- Jalani Enterprises

#10. Mr. S.Saikia, learned Standing Counsel, Finance Department on th e other hand submits that there is no infirmity in the decision taken by the sta te revenue authorities. He submits that the departmental authorities having held Bentonite as a chemical and not as a mineral, it was rightly taxed as a residua ry item in the absence of any specific entry in the taxable schedule to the VAT Act. Though no counter affidavit has been filed, the relevant records have been produced. He also refers to a decision of the Hon’ble Supreme Court in the case of Atul Glass Industries (Pvt.) Ltd. -Vs- Collector of Central Excise reported i n AIR 1986 SC 1730.

#11. Submissions made have been considered.

#12. Section 3(e) of the Mines and Minerals (Regulation and Developme nt) Act, 1957, which is a central legislation, defines minor minerals. Section 1 5 of the said Act empowers the State Government to make rules for regulating the grant of mining leases etc. in respect of minor minerals and for purposes conne cted therewith. Assam Minor Mineral Concessions Rules, 1994 have been made by th e Government of Assam under the Mines and Minerals (Regulation and Development) Act, 1957. Under the said Rules, Bentonite has been classified as a minor minera l with a specific rate of royalty chargeable.

#13. In the Directory of Mineral Consumers in India, a publication of Indian Bureau of Mines, which has been placed on record by the petitioner, Bent onite has been specified as clay as well as mineral. According to the petitioner , it is also the stand of the Government of India that Bentonite is a minor mine ral defined under section 3(e) of the Mines and Minerals (Regulation and Develop ment), Act, 1957, which would be evident from the answer given by the Minister o f State, Ministry of Coal and Mines, Government of India, in the Lok Sabha again st unstarred question No.2284 on 30-07-2002, which has also been placed on recor d by the petitioner and which has remained unrebutted. Further, Bentonite is cla ssified as (cid:28)other clays (cid:29) under tariff item No.2508.10 under the Central Excise T ariff Act, 1985.

#14. Coming to the VAT Act, Part-A General of second schedule thereto furnishes a list of goods taxable at 4%. As already noticed, description of goo ds covered by the item at Serial No.45 is (cid:28)ores and minerals (cid:29) and against Serial No.72, it is (cid:28)clay including fire clay (cid:29).

#15. Reading the provisions of Assam Minor Mineral Concessions Rules, 1994 together with the above entries, it is quite evident that Bentonite being a minor mineral would be covered by the entry at Serial No.45 of Part-A General of the second schedule, if not by both the entries at Serial Nos. 45 and 72.

#16. The Gujarat High Court based its decision in Vijay Foundry to a large extent on the fact that in the Mines and Minerals (Regulation and Developm ent) Act, 1957 or in the Gujarat Rules framed thereunder, nowhere Bentonite was referred to either as mineral or as minor mineral. That was a case decided in th e year 1981 and the Gujarat Rules did not classify Bentonite as a mineral. The s pecific stand of the Central Government came thereafter in the year 2002. Moreov er, in the Assam Rules of 1994, Bentonite is clearly classified as a minor miner al. In these circumstances, the Gujarat decision is clearly distinguishable and reliance placed thereon by the revenue authorities has vitiated the assessment o rder as well as the subsequent orders. As has already be noticed earlier, there is a specific entry aga 17. inst Serial No.45 (if not also against Serial No.72) specifically covering Bento nite as a mineral, which attracts tax @ 4%. Therefore, there is no justification to treat Bentonite as a residuary item against Serial No.1 of fifth schedule to the VAT Act, attracting higher rate of tax at 12.5%. The Apex Court has held in State of Maharashtra -Vs- Bradma of India Limited that a specific entry would o verride a general entry and that resort has to be had to the residuary heading o nly when by a liberal construction the specific heading cannot cover the goods i n question. In the case of Commercial Taxes Officer -Vs- Jalani Enterprises, the Hon’ble Supreme Court has held as under :- (cid:28) It is settled law that when one particular item is covered by one specified en try, then the Revenue is not permitted to travel to the residuary entry. If from the records it is established that the product in question could be brought und er a specific entry then there is no reason to take resort to the residuary entr y (cid:29).

#18. In the case of Atul Glass Industries relied upon by the Revenue, the Hon’ble Supreme Court had reiterated the well known principle that in deter mining the meaning or connotation of words and expressions describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well-settled it is that the words or expression must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. This decision, in our view, instead of helping the Revenue, ca n only fortify the case of the petitioner.

#19. Thus, having regard to the facts and circumstances of the case a nd in view of the discussions made above, we are of the considered opinion that the item Bentonite which is being traded by the petitioner would be covered by t he entry against Serial No.45 of Part-A General of the second schedule to the VA T Act (if not also covered by the entry against Serial No.72 thereof). Consequen tly, it will attract tax @ 4%.

#20. ith. Petitioner will be entitled to the consequential relief. The orders of the lower authorities are accordingly interfered w

#22. Writ petition is allowed. No cost.