interpretation of schedule entries under sales tax laws, VAT act, value added tax, schedule entry,case law on schedule entry, noscitur a sociis, Ejusdem genris, res judicata, rate of tax under VAT

1. Welcome..
…….Workshop on .....
Practical Approach to
Interpretation of
Schedule Entries 1

2. Provisions related to Schedule, Notifications and
DDQ .
 General contents of Schedules and Important
Notifications.
 Collection of factual information regarding
commodity and Excise Tariff Code .
 Theories of interpretation of Schedule Entries.
 How to read and interpret Schedule Entry. 2

3. Section 2(26) - Schedule means the
schedule appended to MVAT Act,
 Section 5- Explains regarding tax-free
goods.
 Section 6 - Levy of tax on goods specified in
the schedule.
 Section 8(3) - Power to issue notification
regarding SEZ, EOU, PSI, EHTP.
3

4. Section 9 - Government can amend the
schedule.
 Section 41- notification regarding refund as
well as exemption in case of Motor spirit and
other goods.
 Section 8(5) of CST Act - notifications can
be issued for exemptions.
4

5. Whether someone is dealer or not ?
Whether registration is required or not ?
Whether it is manufacturing or not ?
Whether any transaction is sale or not ?
Whether tax is payable on such sale or not ?
5

6. What is rate of tax on such goods?
Whether set off is allowable or not?
Application is necessary before notice of assessment is
issued.
Review of DDQ order is possible, CST can review.
DDQ is appealable, Tribunal can decide the appeal.
Chronological disposal of DDQ application.
6

7. Schedule A- Tax-free goods,
Schedule B- Taxable @1%,
Schedule C- Goods Taxable @4% and @5%,
Schedule D- Taxable @20-50%,
Schedule E- 1: Remaining Goods, Taxable @12.5%
7

8. Agriculture implements- Tax-free goods (A-1),
Aids & equipments for handicap persons (A-2),
Handloom and auxiliary machines (A-13),
Musical instruments –handmade (A-30),
Aluminium products- alloys and products (C-6),
Goods of intangible nature (C-39), 8

9. Industrial input and packing material (C-54),
Information technology products (C-56),
Non-ferrous metals and alloys (C-67),
Article of personal wears and clothing accessories
made of textiles (C-81),
Renewable energy devices (C-82),
CST Act notifications (Section 8(5)).
9

10. Whether there is any misclassification of schedule
entry done by the dealer or not….
Whether tax has been paid at correct rate or not…
What is the real nature and description of goods?
Product, its use, function, nomenclature, trademark.
General recognition by customers, Advertisement…
Dictionary meaning of the word, context is important.
Internet / website / encyclopedia/ technical information
Pharmacopoeia / Ayurvedic standard text books.
Disclosures to other departments like customs,
Central excise classification , FDA, etc. 10

11. The Central Excise Tariff Act, 1985 (CETA) classifies
all the goods under 96 chapters and specific code is
assigned to each item. CETA is based on
International convention of Harmonised System of
Nomenclature (HSN), which is developed by World
Customs Organisation (WCO) (That time called as
Customs Cooperation Council).
The four digit numbers indicate the heading in the
HSN classification, six digit numbers indicate the
sub-heading and the eight digit numbers indicate
the specific commodity number.
11

12. (1) Refer the heading and sub-heading. Read
corresponding Section Notes and Chapter Notes. If there
is no ambiguity or confusion, the classification is final
(Rule 1 of GIR).
(2) If meaning of word is not clear, refer to trade practice.
If trade understanding of a product cannot be
established, find technical or dictionary meaning of the
term used in the tariff. You may also refer to BIS or other
standards, but trade parlance is most important.
(3) If goods are incomplete or un-finished, but
classification of finished product is known, find if the
unfinished item has essential characteristics of finished
goods. If so, classify in same heading - Rule 2(a). 12

13. (4) If ambiguity persists, find out which heading is
specific and which heading is more general. Prefer
specific heading.- Rule 3(a).
(5) If problem is not resolved by Rule 3(a), find which
material or component is giving „ essential character ‟
to the goods in question - Rule 3(b).
(6) If both are equally specific, find which comes last
in the Tariff and take it - Rule 3(c).
13

14. (7) If you are unable to find any entry which matches the goods
in question, find goods which are most akin -Rule 4.
(8) Packing material is to be classified in the heading in which
the goods packed are classified – Rule 5.
Chapter Heading Sub- Commodity Description
No. heading Number
85 Electrical / Electronic M/C & equipment
8517 Tele. sets / Apparatus-wireless / wired.
8517 11 Line telephone sets / cordless
8517 1110 Push button type
8517 1190 Other
851712 Telephone for Cellular / wireless
14

15. Whether it is distinct marketable commodity,
Whether it is extensively used for any purpose,
How it is recognized in the market and whether it is
capable of being sold as such,
Whether new commodity emerges and it has higher
utility than the original commodity (if manufacturing),
What is the extent of Value addition when goods are
transformed into new commodity,
Mamata Surgical (RAJ)- surgical cotton,
Whether description in the notification matches with the
description in the Central Excise Tariff Code.
Excise gate pass as evidence, was accepted by MSTT.
Bhagchand Madanlal- (31 MTJ) goods - Pan Parag Jarda. 15

16. 1) Sales Tax Cases (STC),
2) VAT and service Tax Cases (VST),
3) Maharashtra Tax Journal (MTJ),
4) Supreme Court Cases (SCC),
5) Lexicon Of sales Tax Entries,
6) Case law on sales Tax (SC and HC)- Mrs Nadgauda,
7) Interpretation of Words, Phrases, Commodities by
Mr. Agarwal
8) Digest of Mah. Sales Tax Tribunal Decisions.
9) www.Indiankanoon.org
10) www. Indlaw.com
11) www.stconline.com
12) www.manupatra.com 16

17. 1) COMMON PARLANCE THEORY
The words / expressions must be construed in the
sense in which they are understood in the trade by
the dealer and consumer.
Delhi cloth and General Mills Co. Ltd. Vs State of Raj
(46 STC 256) (SC)
Integrated Caps Pvt.Ltd. V/s CTT. (47 MTJ 145) (All.)
17

18. 2) NOSCITUR A SOCIIS:
The meaning :- It is known by its associates.
The meaning of a word is to be Judged by the
company it keeps. It means mo constitute the words in
an act with reference to the words found in immediate
connection with them.
Pradeep Agarbatti V/s State of Punjab (AIR 1998 SC171)
18

19. 3) STRICT INTERPRETATION
Where a statute provides that a particular thing
should be done, it should be done in the manner
prescribed and not in any other way.
Industrial catering Services V/s CTO Chennai ( 132 STC 35).
4) USE THEORY NOT RELEVANT
The nature of the goods can not be determined by
the test of use to which they are capable of being put
to. The user test is logical but not conclusive
Tube Investment V/s Dy. CTO (27 MTJ 573),
Mukesh Kumar Agarwal V/s State of MP (68 STC 324)
CST V/s Govardhanlal (63 STC 435) 19

20. 5) SCIENTIFIC/TECHNICAL MEANING
Where generic expressions of scientific or
technological meaning are used , the technical
meaning would be more relevant.
Televista Electronics V/s CST ( 34 VST 1).
CST V/s Sarin Textile Mills ( 35 STC 634) (SC).
20

21. 6) RULE OF EJUSDEM GENERIS
Meaning : - Of the same kind of species.
When particular words pertaining to a class, category or
genus are followed by general words, the general words
are contrived as limited to things of same kind as those
specified. This rule applies when:
A) The statute contains an enumeration of specific words,
B) The subjects of enumeration contains class or category
which is not exhausted by the enumeration.
C) The general terms follow the enumeration.
D) No indication of different legislative intents.
a) Radhakrishnan Murthi & Co. V/s CT (113 STC 161)
b) CST V/s Govardhandas Tokersey (52 STC 381). 21

22. 7) SPECIFIC ENTRY V/S GENERAL ENTRY
Specific entry would always over ride general entry. But resort
has to be had to the residuary entry only when a liberal
construction of the specific entry can not cover the goods in
question.
a)Bradma of India V/s State of MAH.(140 STC 17)
b)Collector of Central Excise V/s Wood Craft (3 SSC454) (1995).
8)WHEN THERE IS NO REFRENCE TO ANOTHER
STATUTE IN THE SCHEDULE ENTRY
Common parlance would be paramount and reference to the
other statute is not permitted.
Channulal Motilal V/s CST (MP).
22

23. 9) REFERENCE GIVEN OF ANOTHER STATUTE IN
THE SCHEDULE ENTRY :
In such case the definition given in the other statute along
with all its amendments , variations from time to time should be
read into the Schedule Entry.
Agro Industries Trading Corporation V/s State of Kerala.(72STC 1)(SC)
10) PRINCIPLE OF RES JUDICATA:
Meaning :- Thing adjudicated.
Interpretation holding good for considerable period
can not be disturbed for compelling reasons.
Merind Limited V/s State of MAH ( 136 STC 462)
Smith Kline Beecham Consumer Health care V/s Dy. CST (128 STC 189)
WB 23

24. Spare parts: Part which can be replaced on account
of wear and tear / an extra item for use in emergency.
Acme Plastic Industries (48 STC 29).
Components: Article which forms an identifiable
constituent of the finished product and make up the
finished product.
CST V/s Acme Mfg. Co. Ltd. ( 78 STC 79)
CST V/s Punjab Gramophone House (43 STC .141).
Accessories : The article which is adjunct /addition for
convenient use of another part or supplementary to the
main / primary importance.
CST V/s Free India Cycle Ind. (26 STC 428).
24

25. Scrap : Waste or the thing being of no use.
Bharat Iron & Brass Foundries V/s CST (28 STC 455)
Non – obstante Clause: Notwithstanding,
an over riding clause, that a provision
should prevail despite any thing to the
contrary in any other provision.
25

26. •PERFECT DRAFTSMAN EXISTS ONLY IN
THEORY AND NOT IN PRACTICE.
•
Construction is a process to ascertain the meaning
or an art to give the meaning and true sense to the
words of the legislature. If any statutory provision is
open to more than one meaning then the
interpretation represents the true intention of the
legislature may be chosen.
•Interpretation depends on- the Text and the
Context.
•Statute Is The Master And Not The Servant Of The
Judgement.
26

27. •Statement of Object and Reasons. : It is
always safe to have an eye on the object
and the purpose of statute or reasons &
spirit behind it.
•Role of the interpreter- Is not the role of
reformer- sometimes it is beyond the
endurance of sensitive minds to allow the
injustice to be suffered when it is so
palpable.
27

28. • A rule of construction : is flexible and
is merely a presumption in favour of a
particular meaning in case of ambiguity.
The cannons of interpretation do not
override the language of the statute
where the language is clear. They are
only guides us to enable to understand
as what is inferential.
• IT IS DIFFERENT FROM
CASUISTRY AND METAPHYSICS.
28

29. Concepts……..
ASSESSMENT; PROPERTY;
TRANSFER; NOTICE;
ORDER; INSTALLMENT;
INPUT TAX CREDIT- In relation to a taxable person-
a tax on the supply to him any goods or services; and
tax payable by him on the importation of goods or the
services used or to be used for the purpose of any
business carried on or to be carried on by him.
29

30. Distinguish…….
Regulation & Prohibition ; Award & Reward ;
Liberty & Freedom; Purpose & Policy;
Lease & License; Confidential & Secret;
Afternoon & Evening…. when there is twilight;
Repairs & Maintainence.
When the question is essentially on of a degree then
it is impossible to draw a fixed point or a definite line
or to derive any thumb rule-
for e.g. the concept of works contract or of
Manufacturing.
30

31. •Includes : It is used to enlarge the meaning of the
words. It widens the scope of entry by specific
enumeration of certain matters which its ordinary
meaning may or may not be considered.
•That is to say : are really not the words of restriction
but the words of illustration.
•May : Generally permissive and not mandatory.
•Namely : It has various shades but grammatically
can be construed as „ that is to say‟.
•Means : The definition is hard and fast and no
other meaning can be assigned.
•Any : The word has several meanings like – „all‟,
„each‟, „every‟, ‟some‟, or , „one out of several‟
31

32. •And : - Normally conjunctive but some times can be
disjunctive and can be construed as „as well as‟
• Deeming provision: Legal fictions are created for specific and
definite purpose and are limited to that very purpose. “ A part
is always a part and not a whole”.
Occasioned By- Due To :
Notified from time to time- To protect the executor from various
changes made in the statute
Quasi Judicial- It implies not fully judicial but describes the
duty cast on an executive to stick up to the norms of judicial
procedure.
Literal and mechanical construction – To be disregarded if it
conflicts with some essential elements of fair play and natural
justice.
32

33. SCHEDULE A
A-3 Animal driven Carts including bullock carts and CPA
thereof (excluding bearing, tubes and tyres).
A-6 Books that is to say every volume or part or division of a
volume including almanacs, panchangs, timetables
for passenger transport services and periodicals,
maps, charts, orreiries and globes, but
excluding – annual reports, application forms,
account books, balance sheets, calendars, diaries,
catalogues, race cards, publications which mainly
publicise goods, services and articles for
commercial purposes and publications which contain
space exceeding eight pages for writing.
A-55 a) Incense sticks commonly known as agarbatti, Dhoop,
Dupkathi or dhupbatti.
b) Camphor
c) [Dhoop including Loban and Ral]
33

34. SCHEDULE C
C-79 Pulp of bamboo, wood and paper ('and' signifies as 'or').
C-91 a) Spices of all varieties and forms including cumin seed, hing
(asafoetida), aniseed, saffron, pepper and poppy seeds.
b) for the periods starting on or after 1st April,2006, - Chillies,
turmeric, tamarind, coriander seeds, fenugreek and parsley (suva)
whether whole or powdered.
C-89 a) Milk powder including skimmed milk powder.
b) U H T Milk.
c) Condensed milk whether sweetened or not when sold on or after
1st April,2005.
d) Milk containing any ingredient and sold under a brand name,
when sold on or after 1st April,2005
Explanation - U H T Milk, condensed milk whether sweetened or
not and milk containing any ingredient and sold under a brand
name shall not be covered by the scope of this entry when served
for consumption.
e) Curds (whether or not sweetened or flavored) when sold under a
brand name, except when served for consumption
34

35. SCHEDULE C
C-104 a) Writing instruments, ball point pens, felt tipped
and other porus tipped pens and markers,
fountain pens, stylograph pens and other pens,
duplicating stylos, propelling or sliding pencils;
pen holders, pencil holders, and similar holders;
parts (including caps and clips) of the foregoing
articles;
b) Mathematical instrument boxes including
instruments thereof, students colour boxes,
crayons and pencil sharpeners;
c) Writing boards or writing pads, drawing
boards, black boards, greenboards, white
boards, examination pads, foot rulers, erasers,
glitter pens, sketch pens, staplers, pencil leads,
oil pastels, drawing charcoals and envelopes.
35

36. SCHEDULE C
C-92 Sports goods excluding apparels and footwear.
C-99 a) Umbrella and raincoat except garden Umbrella.
b) Components, parts, and accessories of umbrella
except garden umbrella.
C-56, 57,68, 84,105 -That is to say.... IT products, Jute, Oil
Seeds, Rubber , Embroidery or Zari material.
C-108(2)-Timber, sold during 01.04.2008 to 31.03.2010- 4%
(Time specific entry) and after 01.04.2010 - 12.5%
C-39 Goods of incorporeal nature or intangible nature as may
be notified from time to time by the Government in
the official gazette (read with Schedule Entry A- 27). 36

37. SCHEDULE D
1 Foreign liquor as defined from time to time in rule
3(6)(1) of the Bombay Foreign Liquor Rules
1953 excluding wine-50% Wine - 20%
5 HSD Oil - 24% , when delivered to a retail trader
for trading in BMC, Thane and Navi Mumbai - 24%
Other than Mumbai ( Geographical area oriented)
In any other circumstances 21%.
37

38. Cloth Bags: The Entry in itself is exhaustive and not
illustrative which does not permit the inclusion of any
other material which is not enumerated.
Maharashtra Hybrid Seeds v/s State of Karnataka,(119
STC 112)
Whether leak proof battery cells are spare parts of
transistors or electrical goods?
Whether leather cases for transistors is accessory or
not?
V. Govindarajan & Br. v/s The Govt. of Pondicherry (40
STC 169)
38

39. “Vermicelli" are nothing but "maida“ and not the
processed food.
Jaya Food Industries Pvt. Ltd. v/s CTO (82 STC 319)
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“ is not bicycle.
M/S R.K.Rim Pvt.Ltd v/s CST (Bombay HC)
39