PETITIONER:
T.V.L. NILSIN INDUSTRIES
Vs.
RESPONDENT:
STATE OF TAMIL NADU
DATE OF JUDGMENT: 28/07/1997
BENCH:
S. P. BHARUCHA, V. N. KHARE
ACT
HEADNOTE
JUDGMENT
JUDGMENTS.P. BHARUCHA, J.
These appeals, filed by assessees, challenge the correctness of the judgment and order of a Division Bench of the High Court at Madras. The question raised in these appeals is whether ultramarine blue is a pigment, so that it falls under Item 110 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, as contended by the Sales Tax authorities, or a chemical, so that it falls under item 138 thereof, as contended by the assessees. The High Court referred to decisions of other High Courts and came o the conclusion that the stand of Sales Tax authorities was justified.
Item 110 reads thus : ----------------------------------------------------------- Sl. Description of the goods Point of Rate of No. levy Tax % ------------------------------------------------------------ 110. Paints, colours, dry At the point 10
distempers, varnishes and of first sale
blacks cellulose lacquers, in the state.
polish including metal
polishing bars (but not
boot polish), pigments,
indigo, enamels, cement
based waterpaints, oilbound
distemper, water pigments
finishes for leather, plastic
emulsion paints, turpentine
oil, bale oil, white oil and
thinners. ------------------------------------------------------------
Item 138 covers dyes and chemicals not otherwise specified in the Schedule.
Our attention was invited by learned counsel for the assessees to the judgments of the Madhya Pradesh, Rajasthan and Gujarat High Court and we now refer to them seriatim.
In N. Ganu Bhai vs. Commissioner of Sales Tax, Madhya Pradesh, 36 S.T.C. 421, the dispute was whether ultramarine blue, or "neel", was taxable under Entry 25 of Part II of Schedule II of the Madhya Pradesh General Sales Tax Act, 1958, or under the residuary entry in Part VI of Schedule II of that Act. The former entry at the relevant time covered dyes and the Sales Tax authorities contended that ultramarine blue was a dye and should be taxed as such. The High Court referred to the Concise Oxford Dictionary which stated that ultramarine blue was a pigment made from lapis lazuli. It referred to Chambers’s Encyclopaedia which stated that blue pigments in common use by artists consisted of native and artificial ultramarine, cobalt, indigo an prussian blue. It then referred to the dictionary meaning of ‘dye’. It found :
"13. Ultramarine blue is (a)
pigment got either form "lapis
lazuli" or artificially by mixing
clay, carbonate of soda, sulphur
and resin, (b) that when obtained
from lapis lazuli or cobalt, it can
be permanent and can be used by
artists for painting skies and
distances in landscapes, (c) when
obtained artificially is not
permanent, (d) also the base for a
powder used by laundresses.
14. Treating neel as a dye arises
out of the failure to distinguish
"dye" in its true meaning from a
pigment and from the "blue, a
powder used by laundresses". This
powder cannot be used to impregnate
tissues when the material is in a
raw state to yield more permanent
results. It is not capable of being
fixed to the fabric as when it is
used on the fabric it is fugitive,
not fast to light, nor resistant to
action of water and is not capable
of diluting acids or alkalies. It
is not seriously disputed acids or
alkalies. It is not seriously
disputed that neel is used after
the clothes are washed, usually at
the first rinsing, and that with
each rinsing it gets washed away.
It cannot resist or withstand the
use of detergents or even washing-
soda which is alkaline in nature.
Finally, it is neither a direct dye
nor a mordant."
The High Court concluded that ultramarine blue was not a dye.
N. Ganu Bhai’s case considers whether ultramarine blue, or "neel" is a dye . In so doing it finds that ultramarine blue or "neel" is a pigment. The case, far from supporting the assessees, is against them.
In Assistant Commercial Taxes Officer, Jodhpur vs. Rajasthan Chemical Corporation, 65 S.T.C 356, the question was whether ultramarine blue or "neel" was included in the term ‘pigment’. The Board of Revenue for Rajasthan, from whose order a reference was made to the High Court, had posed the question whether ultramarine blue or "neel" in common parlance was covered by the expression "pigment". The Board had not gone into the question but had relied upon on an earlier decision where the Board had held that ultramarine blue could not be considered to be pigment. (No details of the material that was before the Board on the earlier occasion are set out in the High Court’s judgment). The High Court said that the word "pigment" in the relevant entry had been used along with dyes, paints, varnishes and dry colours. The dictionary meaning of the word "pigment" was "any substance used for colouring : that which gives colour to animal and vegetable tissues". Pigment brown, pigment caramine, pigment chrome yellow, etc. were used to convey colouring, by particular colours. Ultramarine blue or ‘neel’ was not a colour. In common parlance, ultramarine blue or ‘neel’ was understood as a substance which was used to whiten clothes. It was not understood as a colour. It was a whitening agent for laundry purposes, used by washermen or by house-holders. Ultramarine blue was not a colour as it was used to whiten clothes. Ultramarine blue was not a pigment.
We have some difficulty with the reasoning of Rajasthan Chemical Corporations’ decision. According to the High Court itself, ultramarine blue is used to whiten clothes. We do not, therefore, follow why it is not a colour or colouring material or why it is not a pigment.
In Union of India 7 Ors. vs. C.M.C India, Ahmedabad, 1979 E.L.T. 298, considerable evidence had been led by the assessee and little by the Sales Tax authorities. The Gujarat High Court noted the evidence of the assessee’s witness that the terms used in the relevant tariff entry were technical terms, that is, terms used by technologists. This, the High Court said, supported the assessee’s case that "ultramarine blue is not known as a pigment in common parlance and that it is known only as ultramarine blue". The evidence showed that "only those persons who were conversant with properties of ultramarine blue may call it as a pigment in scientific term, but so far as business community is concerned, it is known only as ultramarine blue ........... Now, it is found from his evidence and other evidence on record that ultramarine blue is used mainly for the purpose of heightening the whiteness of things to which it is applied. Under these circumstances, even though according to the chemical tests, it can be said to be a pigment, it is not known as such and in the business community or by persons who are dealing with it..... He further admits that in the market, the substances in question is known as ultramarine blue .........." The evidence established, the High Court said, that the product manufactured by the assessees was known only as ultramarine blue by consumers and the commercial community. The Excise authorities had not been able to controvert by evidence the case of the assessees that the particular product was known only as ultramarine blue not only to the manufacturers and traders but even to the common people. In the absence of any evidence on the point, the High Court said, it would be hazardous to interpret the term "pigment" in the entry as suggested by the Excise authorities.
It seems to us that the focus in the case before the Gujarat High Court was mis-directed. That the assessee’s product was ultramarine blue was not in dispute. What was in dispute was whether utlramarine blue was known as a pigment or whether it was considered to fall under some other broad or generic description.
The Madras High Court in the judgment under appeal referred in extenso to the judgment of a learned single Judge of the Calcutta High Court in M/s. Nilsin Company vs. Collector of Central Excise, 1984 ECR 928. The issue before the Calcutta High Court was whether ultramarine blue was a pigment for the purposes of assessment under item 14 (1) (5) The learned Judge said :
"(13). The respondents in paragraph
17 of the affidavit-in-opposition
have averred that in paints like
emulsion paints or water paints,
pigment finishes for leather,
printing ink, textile printing,
Ultramarine Blue is compounded in
larger proportion. They have also
set out in paragraph 18 of their
expression pigment given in various
Coating by Paul Nylen and Edward
Sunderland, ‘pigment’ as the
‘internationally accepted term for
the powdered material intended to
be production of paints, printing
inks, plastic materials, rubbers,
vitrine enamels.’ In the said book
Ultramarine Blue has been
classified as a synthetic and
inorganic pigment. The respondents
have also relied upon Webster’s 3rd
International Dictionary, 1968,
page 1714 which describes
‘pigment’, inter alia as a natural
or synthetic inorganic or organic
substance that imparts a colour
including black or white to other
materials especially, a powder or
easily powdered substance mixed
soluble and used in making paints,
enamels and other coating
materials, inks, plastic, rubber
and also for imparting opacity and
other desirable properties as well
as colour.
(14) After the hearing was
concluded, the learned Advocate for
the petitioner placed before me the
Condensed Chemical Dictionary. 10th
Edn. revised by Gessner G. Hawley,
published by Van Nostrant Reinhold
Co. Incidentally, the respondents
in paragraph 17 of their affidavit-
in-opposition had relied upon he
1953 edition of Van Nostrand’s
Chemical Dictionary for the
definition of ‘pigment’ as a
colouring substance. The said
Condensed Chemical Dictionary
Claims to contain three distinct
types of information, namely, (i)
technical descriptions (ii)
extended definition, and (iii)
descriptions or identifications of
wide range of trade mark products.
The said Dictionary, in my view,
does not support he claim laid by
the petitioner. Thus at page 1068
of the said Dictionary the
properties of Ultramarine Blue have
been, inter alia, described as
"Inorganic pigment ; blue powder ;
good alkali and heat resistance..."
The said Dictionary mentions the
following uses of Ultramarine Blue
: "Colorant for machinery and toy
enamels ; white baking enamels :
printing inks, rubber products,
soaps and laundry blues, cosmetics,
textile printing." "Note : Used in
very low percentage to intensify
whiteness of white enamels rubber
compounds, laundered clothing etc.
by offsetting yellowish undertones
; gives a ‘blue’ rather than a
‘yellow’ white". According to the
same Dictionary, the expression
"Colorant" means any substance that
imparts colour to another material
or mixture". Colourants are either
dyes or pigments" (vide page 267 of
the book). I may also refer to the
definition of ‘pigment’ given at
page 817 of the said Condensed
Chemical Dictionary :-
"Any substance, usually in the form
of a dry powder, that imparts
colour in another substance or
mixture, Most pigments are
insoluble in inorganic solvents and
water... To qualify as a pigment, a
material must have positive
colorant value."
The definition given in the said
book excludes certain substances
including whiting. Mr.
Bhattacharyya is not correct in
contending that Ultramarine Blue is
whiting because, according to the
said dictionary, whiting is
entirely a distinct product
consisting of finely ground,
naturally occurring calcium
carbonate derived form chalk,
limestone, etc. and used as filter,
putty, etc. One of the properties
of Ultramarine Blue is that it is a
whitener, i.e. a white pigment or
colorant used in the paper and
textile industries (vide Condensed
Chemical Dictionary, page 1096).
Therefore, I conclude that the
condensed Chemical Dictionary, 10th
Edn., relied upon by the
petitioners shows that ultramarine
Blue is a pigment having various
uses one of which is whitening or
brightening textiles and clothes.
(15) For the foregoing
reasons, I conclude that there is
overwhelming evidence that
Ultramarine Blue is a pigment.
Ultramarine Blue does no constitute
a separate product as contended by
the petitioner. People conversant
with and dealing with the said
product understand Ultramarine Blue
as a pigment, i.e. as a colorant.
It is used for imparting colour to
various substances. Thus, not only
from he stand-point of its physical
constituents but also from the
stand-point of its various uses and
of popular understanding
Ultramarine Blue is a pigment. In
this connection, it is also
necessary to note the comprehensive
manner in which the entry No.14
gave description of the goods which
were subject to the rate of duty
specified in the said item. Item
No. 14 (1) (5) was broadly in the
form of a residuary clause for
inclusion of pigments, colours,
paints and enamels not otherwise
specified. Thus, pigments, colours,
paints and enamels which have not
been mentioned in any other sub
items would be covered by Item 14
(1) (5) of the First Schedule to
the Central Excises and Salt Act,
1944. Accordingly, I hold that the
petitioner is not entitled o
challenge the validity of the
excise duties imposed upon the
product Ultramarine Blue
manufactured by the petitioner. No
question also arises of commanding
the respondents to refund excise
duties recovered from the
petitioner under Item No. 14 (1)
(5) of the First Schedule to the
Central Excises & Salt Act, 1944".
The Madras High Court in the judgment under appeal rightly relied strongly on the Calcutta High Court decision to come to the conclusion that ultramarine blue was a pigment and, therefore, liable to sales tax under Item 110.
Neither the assessees nor the Sales Tax authorities place any evidence before the Tamil Nadu Sales Tax Appellate Tribunal or before the High Court. They preferred to rely upon the decisions of the High Courts aforementioned. We are in no doubt that ultramarine blue or ‘neel’ is a pigment, having regard to the dictionaries and literature mentioned in the decisions which we have discussed above and that, having regard to its use as a whitener or colouring matter, it is popularly understood to be a pigment.
Accordingly, the appeals are dismisses with no order as to costs.