IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :29.09.2009 CORAM: THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE MR.JUSTICE B.RAJENDRAN Tax Case Nos.1834 of 2006, 2307 of 2008 and W.P.No.18770 of 2000 M/s.Electro Optics (P) Ltd., 267, Kilpauk Garden Road, Chennai. : Petitioner in both Tax Cases. Vs. The State of Tamil Nadu rep. by The Deputy Commissioner of Commercial Taxes, Chennai. : Respondent in both Tax Cases. Prayer: Tax Cases Revision under Section 38 of the T.N.G.S.T. Act, 1959 against the order of the Sales Tax Appellate Tribunal (AB), Chennai, dated 03.12.1999 in T.A.Nos.759 of 1998 and 158/99 and C.O.P. Nos.258 of 1998 and 433/99 relating to the assessment years 1993-94 and 1994-95 respectively. These two appels preferred against the order of the Appellate Assistant Commissioner (CT) VI Chennai, in appeal No.176/97 dated 11.11.97 and 73/97 dated 2.11.98 relating to the assessment years 1993-94 and 1994-95 respectively against the order of the Commercial Tax Officer, Kilpauk, Chnnai dated 9.12.96 and made in TNGST 935765/93-94, TNGST No.93545/94-95 dated 3/12/96 respectively These two appeals preferred against the order of the Appellate Assistant Commissioner (CT) VI Chennai, in appeal No.176/97 dated 11.11.97 and 73/97 dated 2.11.98 relating to the assessment years 1993-94 and 1994-95 respectively against the order of the commercial Tax Officer, Kilpauk, Chennai dated 9.12.96 and made in TNGST 935765/93-94, TNGST NO.935745/94-95 dated 3.12.96 respectively https://hcservices.ecourts.gov.in/hcservices/ W.P.No.18770 of 2000 M/s.Electro Optics (P) Ltd., 267, Kilpauk Garden Road, Chennai. : Petitioner in W.P.No.18770 of 2000 Vs. 1.The State of Tamil Nadu rep. by The Deputy Commissioner of Commercial Taxes, PAPJM Buildings, Greams Road, Chennai - 600 006. 2.The Tamil Nadu Sales Tax Appellate Tribunal (Addl. Bench), Chennai, Rep. by the Secretary, City Civil Court Buildings, High Court Compound, Chennai - 600 104. 3.The Commercial Tax Officer, Kilpauk Assessment Circle, Chennai. : Respondents in W.P.No.18770 of 2000 Writ Petition under Article 226 of the Constitution of India to issue a writ of Certiorarified Mandamus calling for the records of the second respondent in T.A.706/99, quash the order dated 17.4.2000 made there in and further direct the IIIrd respondent to treat electronic servey instrument dealt with by the petitioner as an electronic equipment classified under Entry 50 of part B of the first Schedule to the Tamil Nadu General Sales Tax Act 1959. For Petitioner : Mr.R.L.Ramani Senior Counsel. For Respondents : Mr.Haja Nasrudeen, Special Government Pleader for Tax C O M M O N O R D E R B.RAJENDRAN,J. The petitioner has filed these Tax Cases as against the order passed by the Sales Tax Appellate Tribunal in T.A.No.759 of 1998 and T.A.No.158 of 1999 along with C.O.P.No.258 of 1998 and C.O.P.No.433 of 1998, dated 03.12.1999. https://hcservices.ecourts.gov.in/hcservices/ 2. Originally the Assessing Authority assessed the net taxable turnover at Rs.54,67,907/- including Rs.5,03,700/- representing first sales of machinery taxable at 8% as proposed in the pre-assessment notice which was taken twice while arriving at the total and taxable turnover, which was a mistake, the Assessing Authority therefore revised the assessment by adopting the correct sales turnover as under: First sales of survey instruments Rs.49,64,207-00 First sales of spares and accessories of survey instruments at 16% Rs. 5,03,700-00 Miscellaneous income Rs. 46,642-00 Total and taxable turnover determined at 16% Rs.55,14,547-00 That apart the Assessing Authority levied a penalty under Section 12 (3)(b). Similarly, for the year 1994-95 the Assessing Authority assessed a turnover of Rs.8,75,039/- at the rate of 16% treating the same as sales of survey instruments and also levied a penalty of Rs.1,92,603/- under Section 12(3)(b) and under Section 12(3)(c) a penalty of Rs.1,714/-. Aggrieved against this order, the appellant filed an appeal before the Appellate Assistant Commissioner and the learned Appellate Assistant Commissioner dismissed both the appeals. Aggrieved against that order, the appellants filed these Tax Cases and a Writ Petition before this Court. As all the matters are connected, all the three matters are taken up jointly by consent of parties. 3. The main contention of the learned Senior Counsel appearing for the petitioner is that the commodities dealt with by the petitioner are electronic equipments which are classified under entry 50 of Part B of First Schedule to the Tamil Nadu General Sales Tax Act and the correct assessable rate is only 3%. It was contended that the learned Appellate Assistant Commissioner erred in following a clarification issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai. It was contended that the electronic survey equipments dealt with by the petitioner herein cannot be treated on par with mechanical survey apparatus. It was also contended that the classification of a commodity is not to be determined according to the use to which it is put and he would rely upon a decision of the Apex Court reported in 42 STC 43 and also to a decision by Kerala High Court reported in 104 STC 44. It is further contended that the items dealt with by the petitioner are electronic theodolites whereas the entry 14 of Part F of the First Schedule contemplates only mechanical theodolites and survey instruments. Relying on the decision of the Apex Court reported in 70 STC 97, it was contended that all the items in a group should be considered in a generic sense. It was also contended that when a good was not defined in the Act it must be construed in a sense as understood in common parlance and added that in the commercial circles this commodity is understood as an electronic equipment only. It was further contended that in construing a taxing statute if the https://hcservices.ecourts.gov.in/hcservices/ legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax payer and if there is any doubt as to interpretation, it must be resolved in favour of the subject and accordingly pleaded for allowing the appeal. It was also contended that this item falls under special entry under the entry of electronic goods and not under the general entry of survey instruments under entry 14 of Part F. It was contended that the levy of penalty under Section 12(3)(b) is not proper inasmuch as there was no wilful evasion or contumacious conduct or infraction of law and therefore pleaded for deleting the penalty levied under Section 12(3) (b). 4. The learned Special Government Pleader contended that the data contained in the catalogue of the petitioner commodity is available in the assessment file and also contended that according to the catalogue the commodity dealt with by the petitioner is nothing but a survey instrument. It was further contended that when there were two entries, the special entry will cancel the general one and therefore, the entry 14 Part F of the First Schedule will override the general entry of other electronic goods. The learned Special Government Pleader relied on the decisions reported in 34 STC 153, 39 STC 194 and drew our attention to various case laws where the judicial forums upheld the interpretation that the specific entry excludes the general entry. In short, it was contended that the commodity was correctly assessed by the assessing authority and the same was upheld by the learned Appellate Assistant Commissioner and therefore, contended for dismissing the appeal. It is further contended that regarding the levy of penalty, it was pleaded that the levy was upheld by this Court in W.P.No.19218 of 1996, in the case of Chennai Textiles Chemicals Pvt., Ltd., Vs. State of Tamil Nadu and therefore pleaded for confirming the same. 5. Heard the learned Senior Counsel appearing for the petitioner as well as the learned Special Government Pleader appearing for the respondents. 6. The only question of law which was sought to be argued before this Court is whether the commodity dealt with by the petitioner falls under the classification of First Schedule Part B entry 50 or other electrical goods or under First Schedule Part F entry 14 theodolite, survey instruments as claimed by the Revenue and if so, whether it is assessable at the rate of 3% or 16% respectively. Consequently whether the penalty levied under 12 (3) (b) is maintainable. 7. We have heard the arguments in length to decide the issue in question taking into consideration the question of fact that admittedly the petitioner had imported survey instruments from M/s.Sokkia Company Ltd., Japan, and has sold the same in India as per copy of the bill of entry filed along with the assessment. The order of the Assessing Officer as well as the appellate authority reveals that the petitioner has declared the items imported as survey instruments before the Customs Authority also. The catalogue which https://hcservices.ecourts.gov.in/hcservices/ was produced before the lower forum also was produced before this Court and as per the finding of the Tribunal and from the reading of the catalogue it clearly explains the nature of the commodity. It is also very clear from the catalogue itself that it comes under the category of survey instruments Set2C, Set3C and Set4C and it is called Intelligent Total Stations Series C. The imported instruments are as per clear finding of the Tribunal is a entirely new generation of survey instruments with innovative mechanical and electronic software additions and enhancements. As per the catalogue, the instruments also contain memory card and control panel for multiple functions of the movement. The survey system also consist of powerful telescopic laser theodolite which is used also for night surveying. In short, as per the catalogue and as per the finding of the Tribunal as rightly held that these instruments are intrinsical survey instruments only and there is no dispute also insofar as the conclusion that the instrument is used for surveying purpose. 8. Further, the learned Senior Counsel appearing for the petitioner would only contend that though the instrument is a surveying instrument it cannot be construed or called as a mechanical survey instrument as it is purely managed by electronic gadgets and at the time of passing of the Act the legislatures never thought about implementation of electronic gadgets and whatever it is stated in the Act would only denote the mechanically operated instruments and not to the electronically operated goods. In fact, at this juncture, it is pertinent to extract the relevant provisions which both the parties relied upon to substantiate their case. Tamil Nadu General Sales Tax Act. First Schedule Part B – 50. “Electronic systems, instruments, apparatus, appliances and other electronic goods (other than those specified elsewhere in the Schedule) but including electronic cash registering, indexing, card punching, franking, addressing machines and computers of analog and digital varieties, one record units, word processor and other electronic goods and parts and accessories of all such goods”. Tamil Nadu General Sales Tax Act – First Schedule Part F – 14. “Binoculars, monoculars, opera glasses, other optical telescope, astronomical instruments, microscopes, binocular microscopes, magnifying glasses, diffraction apparatus and mountings therefor including theodolite, survey instruments and optical lenses, parts and accessories thereof.” (underlining is ours) 9. The learned Senior Counsel appearing for the petitioner would contend that on a reading of the two provisions, there is no question of electronic theodolite and electronic survey instruments in entry 14 Part F and therefore, he would only contend that the electronic survey instrument is totally different and distinguishable from an ordinary survey instrument that is mechanically operated https://hcservices.ecourts.gov.in/hcservices/ survey instruments. He would further contend that the survey instrument will not fall under the category and the goods has to be classified only under the head of other electronic goods as it will come under the special category which excludes the normal, general category. He would further strenuously contend that if there is an ambiguity in respect of the classification of the goods and if the legislature has failed to clarify its meaning by use of appropriate language, then the benefit must only go to the tax payer and even if there is an instrument as agreed to the applicability of the particular section, it would necessarily be only in favour of the assessee and therefore, it can only be considered as other electronic items of goods which carries a lesser rate of tax and not as an electronic survey instrument which carries a higher tax bracket. 10. The learned Senior Counsel for the petitioner would contend that all the items contained in this entry related to mechanical instruments only and therefore, the electronic theodolites and other survey instruments would not fall under this classification. Hence, the assessment order itself is not legally sustainable and sought for the quashing of the same. 11. The learned Special Government Pleader would specifically contend that as per the declaration made by the petitioner himself in the Customs Department it is only a surveying instrument and also the fact that there was no dispute that it is used only for surveying purpose when especially a specific category has been mentioned in the Act, there cannot be a reference to a general category and therefore, the assessing officer was right in concluding that the machinery has to be levied only in accordance with the specific category i.e. the surveying instruments. He would also specifically point out that a particular commodity is taxable at a particular rate, at the particular entry and the same must be adhered to. He also relied upon the ruling reported in 34 STC 153 and 39 STC 194 for the propositions that separate entry excludes the general entry and the penalty was also rightly imposed in view of the inordinate delay as well as the wrong declaration in charging of the rate. 12. To decide the question involved, whether the tax has to be levied in respect of these items whether it is called as a surveying instrument or electronic survey instrument what is the rate of tax to be levied, we are specifically governed by the very Act itself. On a careful reading of the two portions of the First Schedule as claimed by both the parties would reveal one thing clear that the entry 50 would clearly state that it would apply to all electronic instruments, apparatus excepting as specified in the very section itself (other than those specified elsewhere in the Schedule) the words which has been shown in the bracket would clearly indicate that if any other item is mentioned elsewhere in the Schedule, it will not be covered under the First Schedule Part B – 50, this was mainly relied upon by the Special Government Pleader and also brought to the notice of this Court that on a reading of Part F-14 of the First Schedule the specific words used there are including theodolite, surveying instruments, ... and accessories thereof. Therefore, when https://hcservices.ecourts.gov.in/hcservices/ there are specific recitals for a particular material, namely, survey instrument and theodolite, it could definitely come within the purview of Part F – 14 and not Part B – 50 as Part B – 50 clearly denotes that other than those specified elsewhere in the Schedule. In Part F-14, the word both theodolite and survey instrument having been specifically mentioned definitely Part B – 50 cannot be attracted. 13. Contra, the learned Senior Counsel appearing for the petitioner would contend that the words survey instrument and theodolite when it was introduced in this Act there were no electronic devices were used only mechanically which was available then therefore, the framers would not have thought of including the electronic items as it was not available then. Therefore, the new introduction of electronic goods would include this electronic and electronically operated item like theodolite and survey instruments which is of new generic equipments would be attracted by entry B – 50. But, on a careful reading, it would denote that when the instrument is mentioned it will be inclusive of whether it is mechanical or electrical or electronic one. There cannot be a distinction in the type of electronic appliances or the latest electronic devices for the very same instrument. In fact, the Assessing Authority as well as the Appellate Assistant Commissioner and thereafter the Tribunal have all clearly held that this is a survey instrument which is imported by the petitioner or a new generation instrument and it is used for a total survey system consist of powerful telescopic and laser theodolite which is even used for a night surveying. In fact, we had also the benefit of catalogue of the item manufactured by the Japan company which would also clearly indicate that this is utilised only for surveying purpose and it is also called surveying instrument. 14. Therefore, definitely it cannot be gainsaid by the petitioner that it falls under electronic goods and that cannot be equated to survey instrument operated mechanically. Earlier it was mechanically operated, now it is being made as electronic devices. 15. The learned Senior Counsel appearing for the petitioner would further contend that on a reading of First Schedule of T.N.G.S.T. Act, Part B entries 38, 39, 40, 41, 42, 50, 51 and 52 which all would specifically say in respect of electronic items and charging 3% as the tax whereas if we take Part D entry 41 which would denote non-electronic weighing machines, dipping measures, metre scales, the sales tax would be at 8% and if we take Part E entry 20 which will denote electrical appliances (domestic and commercial) including Coffee roasting appliances and so many things under the explanation it will say all the above goods notwithstanding that they contain electronic circuits, switchings or control device systems, shall be deemed to be electrical appliances (domestic and commercial) and which would be taxable at the rate of 12% and in the case of Part F entry 10, 11, 12 and 14 it denotes typewriters, teleprinters, tabulating, calculating machines, duplicating machines, binoculars, monoculars, wherein theodolite and survey instrument which mentioned https://hcservices.ecourts.gov.in/hcservices/ in entry F - 14 these are all items will include at 16%. Therefore, his contention is wherever electronic items have come the rate have been specifically made at 3% and he was under the bona fide impression that this being an electronic goods automatically it is liable to be levied only at 3% and he cannot be expected to pay 16% as he would mainly contend that it can only be an electrical item. Therefore, the levy was not correct. 16. But, this argument cannot be accepted in view of the specific recital in the Part B entry 50 which would specifically indicate that other than those specified elsewhere in the Schedule also as stated supra that the specialised materials having been specifically stated under the rate of 16% merely because the devices is operated by electronic method it cannot be treated as a electronic goods. 17. In this connection, the learned Senior Counsel appearing for the petitioner relied upon the following propositions that in spite of availability of a specific entry to get a pep up to the modern technology and to promote consumer electronic industry the lower rate of tax was fixed as in the case reported in 121 STC 450, (SC) BPL Ltd., (2001) wherein it was held that washing machine though was specifically mentioned in item No.38 (iv) of the Schedule to the Act whereas entry 38 (v) relates to electronic items including automatic washing machines. Therefore, the electronic washing machine also come under entry 38(v) and the notification would apply to all electronic goods including automatic washing machines of the appellants. Basing on this ruling, the Senior Counsel appearing for the petitioner would contend that the survey instrument which is now electronic instrument though is separately shown under entry F 14 would come under entry B 50 and to the same effect the other ruling 131 STC 160 (All) Cannon India (P) Ltd; 11 VST 277 (All) Barco Electrical System, 14 VST 150 (Ker) K.M.Mohammed Habeebulla, the decision of the Hon'ble Supreme Court has followed in the above three cases. 18. The learned Senior Counsel appearing for the petitioner would further rely upon 176 IRT 435 (SC) for the interpretation of statute and intention in granting the exemptions wherein the Hon'ble Supreme Court has held that while giving a meaning to an item contained in the schedule of articles, the Court should normally give it a meaning intended by the framers of the Schedule by looking at the various articles mentioned in a particular group. All the items in one group should be considered in a generic sense. It appears that class III of the schedule in the instant case was intended to deal with the subjects of methylated, denatured and rectified spirit which was brought within the limits of the Nagar Mahapalika for use as articles for lighting, fuel, washing and lubricants at the low rate of Re.0.05 per litre while liquor brought within its limits for use as an article of intoxication was intended to be subjected to levy of octroi duty at the higher rate of Re.1 per litre. 19. Further, the learned Senior Counsel appearing for the https://hcservices.ecourts.gov.in/hcservices/ petitioner would rely upon 88 ITR 192 (SC) for the proposition that if the language of taxing provision is ambiguous or capable of more meanings than one, then the Courts have to adopt the interpretation which favours the assessee. In fact, the Hon'ble Supreme Court has held that (on the other hand) if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well accepted rule of construction recognised by this Court in several of its decisions. He would also further contend that since the classification had accepted by the Department for long time the petitioner is of the opinion it was for department to show as to why the different interpretation should be resorted to. In this connection, the Hon'ble Supreme Court has held as in the earlier case, it is now well settled principle of law that when two views are possible, one which favours the assessee should be adopted. He would also rely upon Madras High Court decision reported in 43 STC 404 which has held merely because an article cannot be used without electricity, it may not be decisive. It is necessary that, apart from that fact, the article, by its very nature, answers the description of electrical goods. 20. The argument of the learned Senior Counsel on the basis of these rulings would only indicate that even though the item is mentioned in a separate clause under entry F 14 inasmuch as it is used by electronic methods and when specifically electronic items are given the benefit to this instrument is only to be construed as a electronic goods as under First Schedule Part B and not under Part F 14. His main contention was in all these cases the Courts have interpreted that in spite of the fact that there was a separate entry yet electronic goods when it is mentioned though not specifically would include the said item also. But, there is a distinction in the case. Here, as admitted by the petitioner himself, even before the Customs Authorities that he has brought this machinery only for the purpose of surveying and treated as surveying instrument. When specifically the theodolite as well as the survey instrument has been mentioned there whereas entry B – 50 and a specific clause has been made excluding other items in the schedule thereon definitely there is a distinction. In all these cases, only if there is a difference that the benefit of doubt can be given to assessee but in this case there is no ambiguity, there is no difference of opinion as it has been specifically made as one that of a surveying instrument which is also admitted. 21. In the case of BPL Ltd., reported in 121 STC 450 it is worthwhile to mention that the relevant portion of the judgement in paragraph 4 itself it is clearly stated that prior to July 20, 1988, the rate of sales tax leviable on the sale of automatic washing machine was 10%. On July 20, 1988, by a notification issued in