By TIOL News Service

NEW DELHI, JAN 08, 2019: THE ISSUE BEFORE THE APEX COURT LARGER BENCH WAS - Whether Gypsum Board can come under the broad sweep of the expression 'Gypsum in all its forms' & so be classifiable under Entry 56 to Schedule IV of the Rajasthan VAT Act, attracting VAT @ 4%. YES IS THE ANSWER.

Thereupon, the Court also clarified that the addition of the expression 'in all its forms' to an existing taxing entry, expands its scope & latitude.

Facts of the case

The assessee-company is engaged in dealing in Gypsum Board, which it procures from M/s India Gypsum Ltd. (IGL), which is engaged in manufacturing such items. During the relevant AY, IGL filed application u/s 36 of the Rajasthan Value Added tax Act, seeking to know whether Gypsum Board classified under Entry 56 to Schedule IV of the Act & so taxable @ 4% or else it was classifiable under the residual Entry 1 of Schedule V & so taxable @ 12.5%. The Additional Commr. held that the item in question was to be classified under the latter entry.

During the relevant AY, the assessee's premises were inspected. Thereupon, it was noted that the assessee was discharging VAT @ 4%, despite the goods not being classifiable under Entry 56 of Schedule IV. Hence duty demand was raised for recovery of the differential amount of tax. The appellate authorities sustained such findings. When the assessee filed revision petition before the High Court, such findings were set aside.

On appeal, the Apex Court was of the view that,

++ it is found that that the amended Entry 56 of Schedule IV of the RVAT, read as ‘gypsum in all its forms’, would include ‘gypsum board’ under the term ‘all its forms’. It can hardly be doubted that a meaning has to be given to the Entry made by the legislature, expanding the original Entry from ‘gypsum’ to ‘gypsum in all its forms’. If the object was to include only ‘gypsum’, then why would the Entry be changed to ‘gypsum in all its forms’? The corollary would also be as to what is meant by ‘in all its forms’, as 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. It is noticed that the view taken by the Bombay High Court in an almost identical situation except that the Entry there was ‘of all forms and descriptions’. But the discussion was more or less confined to the expression ‘of all forms’;

++ a reference to the timeless statement of Hand, J. that ‘words must be construed with some imagination of the purposes which lie behind them’, would require us to construe the expression ‘in all forms’ being added to ‘gypsum’ to naturally include not only just gypsum in its original form but in different forms as well;

++ all these examples show that wherever an expression ‘in all its forms’ is used, it has resulted in an expanded meaning, which is a logical corollary of such an expression being added to the original Entry. To 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;

++ it is noted that in terms of notification No.S.O.36.No.F.12(59)FD/Tax/2014-14 dated 14th July, 2014, the RVAT was amended to include, in Schedule V, a separate Entry under item No.19(viii) ‘gypsum board and other false ceiling material’. Thus, 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 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. The obvious attempt is to exclude it from ‘gypsum in all its forms’ in Schedule IV of RVAT and create a separate Entry in Schedule V, whereafter it would naturally be governed by the tax rate applicable to the Entry in question. Hence the Revenue's appeals are dismissed.

(See 2019-TIOL-12-SC-VAT-LB)