Case: THE ADDITIONAL COMMISSIONER (LEGAL) COMMERCIAL TAXES RAJASTHAN Vs. M/S LOHIYA AGENCIES

3. The brief facts which have given rise to the present dispute are as follows. M/s. Indian Gypsum Ltd. (hereinafter referred to asa manufacturer of what is commonly known as drywall or ‘gypsummoved an application under Section 36 of RVAT before the Additional Commissioner, Commercial T ax Department, Rajasthan, Jaipur for ascertaining whether gypsum board would fall within the category of the amended Entry 56 of Schedule IV of the RVAT, with 4% rate of tax applicable, or under the residuary Entry referred to aforesaid. The Additional Commissioner, vide order dated 27.9.2007, opined that ‘gypsumbeing commercially a different product would not fall under Entry 56 of Schedule IV of the RVAT but would fall under the residuary Entry, making it subject to the 12.5% slab of taxation. The gravamen of reasoning of the Additional Commissioner, as found from the order, is that ‘gypsumis a separate commercial product using a different name and thus the factum of 95% of the ‘gypsumbeing constituted of gypsum is not relevant, as supported by the fact that a long manufacturing process is involved in preparing ‘gypsumwherein in addition to the calcination process, additives, paper, foam, water etc., are used, resulting in the formation of a product having uses, quite dissimilar to gypsum.4. M/s. Lohiya Agencies/respondent No.1, is stated to be a merchant dealing in ‘gypsumprocured from IGL and, thus, came to be assessed by the Commercial T ax Officer for the assessment year 2006-07 and 2007-08 on 25.8.2007, post-inspection of his premises. Since the sale of gypsum board has been made with the VAT rate at 4% despite the said goods not falling under Entry 56 of Schedule IV of the RVAT, it was alleged by the T ax Department that there was tax evasion which led to initiation of proceedings under Sections 25, 55 & 61 of RVAT and the respondent firm was made liable to pay the differential tax of 8.5% for the assessment years, along with penalty and interest. The endeavours of the respondent No.1, assessee, before the Deputy Commissioner (Appeals) failed in terms of order dated 2.1.2009 and also before the Rajasthan T ax Board vide order dated 21.11.2012. This culminated in a revision petition being filed before the Rajasthan High Court which, however, reversed the views expressed by the forums below, in terms of the impugned order dated 3.2.2017. In arriving at such a conclusion, the High Court relied upon judgments of the Bombay High Court in Commissioner of Sales T ax, Mumbai v. India Gypsum Ltd.and the Supreme Court in The States of Gujarat v. Sakarwala Brothersas well as in Trutuf Safety Glass Industries v. Commissioner of Sales T ax, U.P.9) 25 VST 210 (Bom.7) 19 STC 24   (SC).(2007) 7 SCC 242.

Court's reasoning:
6. In our considered view, to truly appreciate the controversy at hand, two aspects have to be kept in mind. Firstly, the change of the Entry by a conscious decision of the legislature, whereby the Entry of merewas changed to ‘gypsum in all itsThis certainly signified that something more than basic gypsum was sought to be included in the Entry by referring to ‘gypsum in all itsThe sequitur would be whether ‘gypsumwould fall in the expanded definition of ‘gypsum in all itsor whether it is completely a different product.7. Secondly (it is really in order to appreciate the first), what is the original composition of gypsum, and how does the processing convert it into gypsum board, would have to be examined.If we look into other forms of gypsum, where gypsum is innately present in the end product, two examples stare at us: (i) Plaster of Paris and (ii) gypsum blocks. Plaster of Paris (stucco) is merely calcinated calcium sulphate, a dehydrated form of gypsum. Gypsum Blocks, on the other hand, are composed of gypsum plaster, water and in some cases additives like vegetable or wood fibre, for greater strength. The gypsum boards are used as thinner plasterboards for paneling stud walls. The aforesaid material itself gives rise to the conclusion that there are no major chemical changes in gypsum which are carried out other than dehydration and mixing of additives, so that the paper sheets can be used on both sides, to be made capable of being used as a board.12. Keeping in mind the aforesaid factual findings, let us turn to the judicial views dealing with the subject in question, whether relating to gypsum board or in respect of other products, where there is derivation of some other end product.13. On giving consideration to the matter in issue, we find that the amended Entry 56 of Schedule IV of the RVAT, read as ‘gypsum in all itswould include ‘gypsumunder the term ‘all its. We are persuaded to come to the aforesaid conclusion on the basis that, it can hardly be doubted that a meaning has to be given to the Entry made by the legislature, expanding the original Entry fromto ‘gypsum in all itsIf the object was to include onlythen why would the Entry be changedto ‘gypsum in all itsThe corollary would also be as to what is meant by ‘in all itsas it is not, as if mere geometrical alteration of a shape would form part of the Entry. In such a situation, the original Entry itself was comprehensive enough to have included it. We have noticed the view taken by the Bombay High Court in an almost identical situation except that the Entry there was ‘of all forms andBut the discussion was more or less confined to the expression ‘of allThis court in Sakarwala Brothers (supra) observed that it was the chemical composition of the substance in question that mattered, to decide whether it would fall within the scope of a particular Entry. In the present case, there is really no chemical change which occurs in the substance as dehydration only reduces the water content and thereafter, it is mixed with additives for the purpose of increasing bonding and other related purposes. Substantively, the character ofis not changed in the mechanical exercise of converting it into a board along with, of course, certain chemical processes of heating and mixing, to achieve an ultimate objective.15. The observations of this Court in Trutuf Safety Glass Industries (supra) are of significance, where a distinction is sought to be made between the words ‘in allas juxtaposed to the expression ‘allThe words ‘allare said to be restricted to multiple items of the same kind, while the expression ‘in allis to multiply the same commodity into different forms. Therefore, differentof gypsum would get included in the expression ‘in all. A reference to the timeless statement of Hand, J. that ‘words must be construed with some imagination of the purposes which lie behindwould require us to construe the expression ‘in allbeing added toto naturally include not only just gypsum in its original form but in different forms as well.o fully understand the scope of Entry 56 of Schedule IV of the RVAT, we have looked into the manufacturing process of gypsum board. A reference to the extract aforesaid would show that the initial steps are of only crushing and grinding the gypsum whereafter it is heated and partially dehydrated, which in turn is calledor ‘Plaster ofThere does not appear to be any doubt that suchwould form part of the Entry ‘in all itsThe unique characteristic of stucco, when mixed with water, is that the smooth plastic mass so formed can be molded into the desired shape, which obtains its rock-like state on hardening. This very characteristic is stated to be used in the development and production of gypsum board. In the second step of the manufacturing process, stucco is mixed with a number of additives in an excess amount of water to prepare a slurry, to be ultimately converted back into a dehydrated form, before being cut into desired sizes. Not only that, ‘gypsumis defined as real gypsum between two paper sheets. Will that take away from the description of gypsum? We think not. Even if the sheets are added, the wide description ‘in all itswould certainly include ‘gypsum. In the case of Sakarwala Brothers (supra), the factum of there being the same chemical composition of patasa, harda and alchidana and the ability to convert them back into sugar on being dissolved in water and on being subjected to other ‘appropriateresulted in a finding that they would be included asIn fact, gypsum board, devoid of its top and bottom boards, can be utilized, with some processing, in a similar manner as gypsum. When the meaning of the wordis meant to include ‘visible shape or configuration ofas observed in State of Jharkhand (supra), we cannot see any reason why gypsum board would not form a part of the expanded terminology. In the same line, this Court in Alladi Venkateswarlu (supra), has given an expanded definition to ‘rice obtained from paddy that has met tax under theto include parched rice and puffed rice within the termas it had not changed its identity so as to not be describable asat all. A broad interpretation was, thus sought to be given by applying the ‘commonrule of interpretation. Similarly, this Court in Tungabhadra Industries Ltd (supra) observed that even if an inter-molecular or configurational chemical change takes place which results in hardening of the oil, its nutritional properties continue to be the same. Moreover, even if it acquires new properties, in the sense that the tendency to turn rancid is greatly removed and it is easier to transport, ‘hydrogenated groundnutwas held not to be excluded from the original Entry of ‘groundnut. All the aforesaid examples show that wherever an expression ‘in all itsis used, it has resulted in an expanded meaning, which is a logical corollary of such an expressionbeing added tothe original Entry.take a view to the contrary in the given situation would amount to giving no meaning to the added expression as there are really not too many possibilities on what could have been included in such an expression.21. We may also note another fact which has come to our notice that in terms of notification No.S.O.36.No.F .12(59)FD/T ax/2014-14 dated 14 th July, 2014, the RVAT was amended to include, in Schedule V, a separate Entry under item No.19(viii) ‘gypsum board and other false ceilingThus, the legislature by a conscious decision in 2014, sought to create a separate Entry for gypsum board, which was not the case in respect of the assessment years in question. This, in our view, belies the endeavor to include gypsum board in the residuary Entry, before such specific inclusion as then there would have been no need for such an Entry.