*1* kps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SALES TAX APPEAL NO.2 OF 2009 (VAT Appeal No.2/2009) M/s R.K.Rim Pvt.Ltd. ..Appellant -Versus- The Commissioner of Sales Tax, Mumbai and another. ..Respondents ........... Mr.V.A.Patkar with Mr.M.M.Vaidya, for the Appellant. Mr.V.A.Sonpal, “A” Panel Counsel for the Respondents/Revenue. .......... CORAM : V.C.DAGA & K.K.TATED, JJ. {Closed for orders : 16th April, 2010 Pronounced on : 06th May, 2010} JUDGMENT (Per K.K.Tated, J): 1 Heard the learned counsel for the rival parties. 2 The present appeal is preferred by the Appellant/Assessee against the judgment and order dated 07th November, 2008 passed by the First Bench of the Maharashtra Sales Tax Tribunal, Mumbai in VAT Appeal No.1/2008. FACTS 3 The relevant facts leading to the present appeal can be summarized as under:- The Appellant is a private limited Company and it has manufacturing unit at Vasai in Thane district. The Appellant started manufacturing bicycles “Model Matrix” with an auxiliary electric motor having a 30 minutes backup power of less than 0.5 kilo watt, which is also called as “E-Bike-Matrix”. Battery is provided along with pedal assistance. Battery is required to be charged if a person *2* wants to use the electrical energy. No engine is fitted in the said “E- Bike”. The Appellant was of the view that the said product is covered by the word “bicycle”, as such, the same is exigible to tax @ 4% as it falls under the schedule Entry C-14 which reads thus:- “Bicycles, tricycles, cycle rickshaws and parts, components and accessories and tyres and tubes thereof.” 4 The Appellant, therefore, filed an application under Section 56(1)(e) of the Maharashtra Value Added Tax Act, 2002 (in short “the VAT Act, 2002”) before the Commissioner of Sales Tax, Maharashtra State, Mumbai for determination of the rate of tax on “E-Bike-Matrix”. It is the case of the Appellant that the product sold by the Appellant is not “motor-vehicle” and therefore, the same is covered by the schedule Entry C-14 which is exigible to tax @ 4%. In support of its contentions, the Appellant produced on record various documentary evidence including a certificate issued by the Automotive Research Association of India stating therein that the said product is not “motor vehicle”. The Appellant also produced the affidavits of its clients, who had purchased the said product as “bicycle”. 5 The said application was decided by the Sales Tax Commissioner, Mumbai vide its order dated 17.12.2007 holding that the said modern electric bicycle is not a “motor vehicle” but not covered by the word “bicycle” falling in the schedule Entry C-14 and therefore, the same is exigible to tax @ 12.5%. 6 Aggrieved by the aforesaid order dated 17.12.2007, the Appellant preferred the VAT Appeal No.1/2008 before the Maharashtra Sales Tax Tribunal, Mumbai. The Tribunal vide its order dated 07.11.2008 dismissed the appeal upholding the order passed by the Commissioner of Sales Tax. Hence, the present *3* appeal under Section 27 of the VAT Act, 2002. SUBMISSIONS 7 Mr.Patkar, learned counsel for the Appellant submitted that both the authorities below erred in giving the restricted meaning to the word “bicycle” mentioned in the schedule Entry C-14 which covers all types of bicycles. The Tribunal has erroneously equated the “E-Bike” with the vehicles which are known as scooters and motorcycles. According to him, Entry 87 of the same Schedule-C speaks about the “sewing machines” which are either pedal operated or electric motor operated and invariably have both the options, therefore, can it be said that such sewing machine which has electric motor is excluded from that entry? 8 Mr.Patkar further submitted that the Tribunal is not justified in observing that the intention of the legislature is otherwise. According to him, if the intention of the legislature was otherwise then it would have excluded the “cycle with auxiliary motor” from the word “bicycle” mentioned in that entry. He submitted that wherever the legislature intended the exclusion, it has done so with specific wording. For example, Entry No.C-29(a) which applies to “drugs” excludes therefrom the “mosquito repellents in any form”. In similar way, there are several entries in the statute. 9 Mr.Patkar further submitted that the Tribunal ought to have considered the common parlance evidence submitted by the Appellant in its proper perspective. However, the Tribunal erred in holding that the evidence led by the Appellant was of no assistance to hold that E-bike is a bicycle as commonly understood by the people at large. *4* 10 In support of his submission, Mr.Patkar relied on a certificate issued by the Automotive Research Association of India certifying that the “E-bike matrix” is not deemed to be a “motor- vehicle”. He also relied on the notification dated 16.09.2005 issued by the Department of Road Transport & Highways by which the Central Motor Vehicle Rules, 1989 has been amended by the Central Motor Vehicles (fifth amendment) Rules, 2005 and the following clause has been inserted defining the “battery operated vehicle”:- “Battery Operated Vehicle” means a vehicle adopted for use upon Road and powered exclusively by an Electric Motor whose traction energy is supplied exclusively by traction Battery installed in the vehicle. Provided that if the following conditions are verified and authorized by any testing agency specified in Rule 126, the battery operated vehicle shall not be deemed to be a motor vehicle. (i) The thirty minutes power of the motor is less than 0.25 k/w. (ii) The maximum speed of the vehicle is less than 25 km./h. (iii) Bi-cycles with pedal assistance which are:- (a) equipped with an auxiliary electric motor having a 30 minute power less than 0.5 kW whose output is progressively reduced and finally cut off as the vehicle reaches a speed of 25 Km/h, or sooner, if the cyclist-stops pedalling and, (b) fitted with suitable brakes and retro reflective devices i.e. one white reflector in the front and one red reflector at the rear. Explanation : The thirty minute power of the motor is defined in AIS:049:2003 and method of verification is prescribed in AIS:041:2003, till the corresponding BIS specifications are notified under the Bureau of Indian Standars *5* Act, 1986 (63 of 1986).” 11 Mr.Patkar also relied on the opinion given by Mr.V.R.Mahashabde, B.E. Mechanical which states the differences between “E-bike”, “bicycle” and “moped” in the following manner:- E-bike Bicycle Moped Operates on battery driven motor with 250 or less wattage. Pedal operated. Runs only on fuel converted to gasoline. Can be operated by pedals in case of battery discharge. Only pedal operated. No other way. Only engine operated on fuel. Light in weight Light in weight Heavy in weight Speed limit 20-22 km/Hr. Speed limit 20-22 km/Hr. Speed limit 50-60 km/Hr. Registration & Licence not required. Registration & Licence not required. Registration and Licence required. 12 Mr.Patkar also relied on the dictionary meaning of “bicycle”, as mentioned in Webster’s Encyclopedia Unabridged Dictionary, in order to show that the Appellant’s product falls under the schedule Entry C-14. The dictionary meaning is as under:- “Bicycle: (1) a vehicle with two wheels in tandem, usually propelled by pedals and having handlebars for steering and a saddle like seat. (2) Also called safety bicycle, a similar vehicle, sometimes equipped with a motor in which the seat is mounted between tandem wheels of equal or nearly equal size, the rear wheel being connected to the pedals by a chain.” 13 In support of his submissions, Mr.Patkar relied on the judgment in the matter of Commissioner of Sales Tax, Maharashtra State, Bombay Vs. La Bela Products reported in 59 STC 221 wherein this Court held that the entries in a schedule to the Sales *6* Tax Act must be interpreted in the light of current conditions. Mr.Patkar, thus, submitted that in the present case, the Appellant is using the battery power in its product just for the convenience of the customers and the said product remains as bicycle in its original form though the battery is fixed in addition to the ancient form of bicycle. 14 Mr.Patkar also relied on the judgment in the matter of State of Gujarat vs. Bhagwati General Agency (Import) reported in 83 STC 347 wherein the Gujarat High Court held that where there is a specific entry in the description of which entry the product in question can more appropriately fall, then it is not permissible to have resort to a residuary entry. Mr.Patkar, thus, submitted that in the present case the Appellant’s product squarely stands covered by the word “bicycle” and, therefore, the authorities below erred in coming to the conclusion that there is no specific entry in the schedule and therefore, the same would fall under the residuary entry. 15 Mr.Patkar further relied on the judgment in the matter of State of Maharashtra Vs. Bradma of India Ltd. reported in 140 STC 17. In this case, the Apex Court held that a specific entry in the schedule to a taxing statute would override a general entry. Resort can be taken to the residuary entry only when a liberal construction of the specific entry cannot cover the goods in question. On the basis of this interpretation, Mr.Patkar urged that the Appellant’s product is squarely within the sweep of the schedule Entry C-14 and, therefore, there is no question of putting the same under the residuary entry. PER CONTRA *7* 16 Mr.Sonpal, learned “A” Panel counsel for the Respondents/ Revenue submitted that both the authorities below have rightly considered the facts of the present case and rightly held that the Appellant’s product does not fall under the schedule Entry C-14. 17 According to Mr.Sonpal, the “bicycle” connotes a pedal driven, human powered, single track vehicle, having two wheels attached to a frame, one behind the other. A person who rides a bicycle is called a cyclist or a bicyclist. The bicycles were introduced in the 19th century and now number about one billion worldwide, twice as many as automobiles. They are the principal means of transportation in many regions. They also provide a popular form of recreation and have been adapted for such uses as children’s toys, adult fitness, military and police applications, courier services and bicycle racing. The basic shape and configuration of a typical upright bicycle has changed little since the first chain driven model was developed around 1985. However, many details have been improved, especially since the advent of modern materials and computer aided design. The invention of the bicycle has had an enormous impact on society, both in terms of culture and of advancing modern industrial methods. 18 Mr.Sonpal further submitted that the plain meaning of “bicycle” as per the Oxford English-Marathi Dictionary in Marathi language is “payata maroon chalvayache don chakanche wahan, duchaki, sayakal.” He also relied on the dictionary meaning of “bicycle (sayakal)” in Marathi language as given in the dictionary viz Marathi Shabd Ratnakar by Late.V.G.Apte that “Sayakal : Dwichakra paadyan, paygadi”. 19 Mr.Sonpal further submitted that to know the popular *8* meaning of “bicycle”, we cannot rely on the foreign dictionaries or its scientific names or meanings. In support of this submission, he relied on the judgment in the matter of Commissioner, Sales Tax Vs. Pali Ram Laxmi Narain reported in 46 STC 89 (All) wherein the Allahabad High Court held that in respect of articles which are typical to Indian society it might not be safe to rely on the dictionary meaning given in Webster or Oxford. An item like “tikuli” may be unknown among the European society. To take guidance thereto from the dictionaries or Encyclopaedia Britannica would be falling into an error. 20 Mr.Sonpal further submitted that in interpreting the entries of taxing statute it is well known principle that the preference should be given to the common parlance meaning and that one defined in local dictionary. In common as well as in commercial parlance, “bicycle” is what as defined earlier whereas the product involved in the present case is battery operated “E- bike”. In support of this submission, he relied on the judgment in the matter of Commissioner of Sales Tax vs. Suraj Rubber Industries reported in 11 VAT & Service Tax Cases page 480. In this case, Allahabad High Court held that in interpreting the entries of tax statutes, preference should be given to the common parlance meaning over the one as defined in a dictionary. The commodity should be understood in the sense in which persons dealing with it understand. He also relied on the judgment in the matter of Commissioner of Sales Tax, Madhya Pradesh, Indore vs. Jaswant Singh Charan Singh reported in 19 STC 469 wherein the Apex Court held that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or technical meaning of such terms but to their popular meaning or the meaning attached to them by those *9* dealing in them, that is to say, to their commercial sense. 21 Mr.Sonpal further relied on the judgment in the matter of Plasmac Machine Manufacturing Co.Pvt.Ltd. Vs. Collector of Central Excise, Bombay reported in 84 STC 107, wherein the Apex Court held that it is an accepted principle of classification that goods should be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning. How the product is identified by the class or section of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance when the goods are marketable. 22 Mr.Sonpal also relied on the judgment in the matter of Shanker Rubber Industries Vs. the State of A.P. reported in 39 STC 415, relevant paragraph of the judgment reads thus:- “Entries in schedule- Cycle Rickshaw Tyres- Whether different from cycle tyres- Lower rate of tax on cycle tyres- Whether applicable to cycle rickshaw tyres- Andhra Pradesh General Sales Tax Act (6 of 1957), Secs.5(2)(a), 9; First schedule, Entries 15, 17. There is a fundamental and essential difference between cycles and cycle rickshaws in common parlance and also in commercial sense. The designs of the two vehicles are different. The tyres and tubes used for cycle rickshaws are not ordinarily used for cycles. Further, the price of cycle rickshaw tyres and tubes is higher than the price of cycle tyres and tubes. The fact that the tyres and tubes used for cycle rickshaws can also be used by cyclists is not a ground for holding that cycle tyres and tubes are the same as cycle rickshaws tyres and tubes. Hence a dealer in tyres and tubes used for cycle rickshaws cannot claim the benefit of the lower rate of tax under G.O. Ms. No.173 dated 6th February, 1964 issued under Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 which applies only to cycle tyres and tubes.” 23 In view of these authorities, Mr.Sonpal submitted that *10* the Appellant’s product cannot be classified as “bicycle” for the purpose of taxing benefit of the schedule Entry C-14. The product in which the Appellant is dealing runs with the help of energy produced through the electric battery. Under the BST Act, 1959 a battery is charged @ 12.5% for the purpose of sales tax. If the Appellant’s product is classified under the scheduled Entry C-14 then the battery which is used for the purpose of supplying energy will have to be taxed @ 4% only which in fact taxable @ 12.5%. 24 Mr. Sonpal further submitted that the brochure produced by the Appellant clearly shows that the Appellant’s product cannot be classified as bicycle. After perusing the salient features and specifications of the product of Appellant, no one can say that the Appellant’s product falls under the category of “bicycle”. Salient features and specifications given the said brochure are as under:- “Salient features:- Attractive, affordable & useful for entire family; Having aerodynamic shape, elegant look; Can travel 100 kms, per charge; Travel 100 kms in Rs.7/-; Eco-friendly; No pollution; No fuel required; No Driving Licence; Powerful Headlights; Strong shock absorbers; Maintenance free; Available in attractive colours; Comfortable & easy to drive; and No hassle of changing gears. Specifications:- Standard Load capacity : 120 Kg Weight : 60 Kg Max. Speed : 25 Km/Hr. Gradibility : 6 Degrees Charging Time : 6 Hrs. Rated voltage : 48 V Input voltage of charging : 220 V Running Distance per charge : 100 Kms. Battery : Sealed lead acid maintenance free. Charger : 220 V.CE” *11* 25 Mr.Sonpal further submitted that the test report of Automotive Research Association of India produced by the Appellant on record is not relevant in the present case because the same has defined only the vehicle which does not require registration under the Motor Vehicles Act. In the present case, the product introduced by the Appellant is with electric battery whereas the simple meaning of “bicycle” is a pedal driven, human powered, single track vehicle, having two wheels attached to a frame, one behind the other. 26 According to Mr.Sonpal, intention of the legislature is that a common person should not be burdened with heavy tax if they are using “bicycle” whereas in the name of “bicycle” the Appellant wants to introduce “E-bike” which runs with help of a battery. If a common person purchases a battery separately then he has to pay the sales tax @ 12.5% and, therefore, intention of the legislature is very clear that for the benefit of common person the sales tax is @ 4% on the bicycles. He also urged that the word “bicycle” has to be understood in the light of the word “cycle rickshaw”. According to him, bicycle and cycle-rickshaw, these words take colour from each other. Considered on this backdrop, there is no substance in the appeal preferred by the Appellant and the same deserves to be dismissed. CONSIDERATION 27 We have heard both the sides at length. We have gone through the orders passed by the Sales Tax Commissioner as well as the Tribunal in this case. One thing is clear that if a vehicle runs with the help of any energy then the same cannot be termed as “bicycle”. *12* 28 For the purpose of charging sales tax we have to consider the plain meaning of “bicycle” in common parlance. In common parlance a “bicycle” is a pedal driven, human powered, single track vehicle, having two wheels attached to a frame, one behind the other. Even the price list placed on record by the Appellant shows that the Appellant’s product price ranges from Rs. 4,500/- to Rs.10,000/-. In addition to that, battery price ranges from Rs.3,000/- to Rs.5,600/-. The following chart produced by the Appellant shows the price list of battery operated bicycle:- Model E-cycle Yamaha Type Cycle Matrix LX 50km Matrix 100km. Price 4500 5500 9000 10000 Battery Price 3000 2500 4400 5600 Sub total 7500 8000 13400 15600 29 It is clear from the above chart that the Appellant is charging near about 50% on the total cost of their product towards battery price. If the Appellant’s product is classified under the schedule Entry C-14 then indirectly the sales tax on battery shall be @ 4%, whereas if a person purchases a battery separately he has to pay the sales tax @ 12.5%. On this backdrop, submission of Mr.Patkar if accepted it shall create anomalous situation not contemplated by the law. On this count also, it is not possible to hold that the Appellant’s product falls under the schedule Entry C-14. 30 The Appellants in support of their contentions relied on the three judgments in the matters of La Bela Products, Bhagwati General Agency (Import) and Bradma of India (all supra). In the matter of La Bela Products (supra), this Court held that the entries in a schedule to a sales tax must be interpreted in the light of *13* current conditions. We know that in India generally the people understand the meaning of “bicycle” as a pedal driven, human powered, single track vehicle, having two wheels attached to a frame, one behind the other. Therefore, the Appellant cannot take assistance of this authority so as to cover its product under the schedule Entry C-14. 31 In the case of Bradma of India Ltd. (supra) and Bhagwati General Agency (supra), it is held that where there is a specific entry in the description of which entry the product in question can more appropriately fall, then it is not permissible to have resort to a residuary entry. In the present case, considering the description of the Appellant’s product, it is clear that there is no specific entry in the Sales Tax Act in which the same can be taxed and therefore, it is necessary to hold that the Appellant’s product comes under the residuary entry. 32 The Tribunal based on the elaborate well reasoned order has held that E-bike cannot be brought within the scope of a schedule Entry C-14. The Tribunal has pointed out that the essence of bicycle is self powered whereas in the case of the Appellant’s product, the same runs with the help of battery. We find that the judgments passed by the Sales Tax Commissioner as well as the Tribunal have covered all the points. The Tribunal while deciding the present case, considered (a) concept of bicycle and dictionary meaning, (b) common parlance and e-bike, (c) salient features of Matrix, (d) test report of Automotive Research Association of India, (e) intention of legislature and (f) observations on functions of the Appellant’s product. The Tribunal in its judgment discussed all these points in detail based on the authorities of the Apex Court and the High Courts. *14* 33 In this case the learned counsel for the Appellant produced before us the brochure of the Appellant’s product. It inter-alia have the photos of the products of Appellant. Seeing those photos no common man will ventuseg to call it bicycle. As held by the Apex Court in the case of Plasmac Machine Manufacturing Co. Pvt.Ltd. (supra), the goods should be classified according to their popular meaning or as they are understood in their commercial sense. The Appellant’s product in it’s popular meaning cannot be classified as “bicycle” and hence, it does not fall within the schedule Entry C-14. As it does not fall in any specific entry, it has been taxed under the residuary entry. The authorities below have in well reasoned orders turned down the contention of the Appellant that the Appellant’s product is “bicycle” and should be classified in the schedule Entry C-14 to the Sales Tax Act. 34 At this juncture, let us test the above view on the touchstone of general cannons of statutory constructions. It would not be out of place to mention that the maxims in law are said to be somewhat like axioms in geometry. They are principles and authorities and part of general customs and common law of land. These are sorts of legal capsules useful in dispensing justice. In other word, maxims can be defined as established principle or of interpretation of statutes. With this understanding, let us turn to the maxim “NOSCITUR A SOCIIS”, which means the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it. A man may be known by the company he keeps and a word is known by the accompanying words. Words derive colour from the surrounding words. The coupling of words together shows that they are to be understood in the same sense. Where the meaning of a particular word is doubtful, it may be *15* ascertained by looking at adjoining words. In the construction of statutes, the rule noscitur a sociis is frequently applied, the meaning of a word, and, consequently, the mens legis is ascertained with reference to the context, and by considering whether the word in question and the surrounding words are, in fact, ejusdem generis, and referable to the same subject matter. The meaning of law can be collected by