Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5
PETITIONER:
ADVANCE BRICKS COMPANY
Vs.
RESPONDENT:
ASSESSING AUTHORITY, ROHTAK & ANR.
DATE OF JUDGMENT22/09/1987
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
DUTT, M.M. (J)
CITATION:
1988 SCR (1) 272 1987 SCC Supl. 650
JT 1987 (3) 655 1987 SCALE (2)658
ACT:
Haryana General Sales Tax Act, 1973: ss. 15 & I8-State
Government Notification of 1973-’Sun dried bricks’-Whether
’bricks’-Whether exigible to sales tax.
HEADNOTE:
The Notification dated 5th May, 1973, issued by the
State Government under s. 18 of the Haryana General Sales
Tax Act authorised levy of tax under s. 15 of the Act at the
first point in respect of the named goods, of which brick
was one. The appellant, a registered dealer claimed
deduction of a certain sum out of the gross 1:) turnover in
respect of assessment of sales-tax for the accounting period
1981-82, on the ground that he had purchased sun-dried
bricks on payment of sales tax under the Act and that amount
represented the sales price of such tax paid bricks, and
that a second set of tax in the hands of the dealer was not
exigible. The claim was rejected by the authorities.
The appellant filed writ petition before the High
Court, which rejected his claim on the ground that raw
bricks did not come within the purview of the notification.
Allowing the appeal in part,
^
HELD: The notification dated May 5, 1973 issued by the
State Government under s. 18 of the Haryana General Sales
Tax Act, 1973 applied to the sun-dried bricks. [274E]
’Brick’ is a generic term in which both the sun-dried
and ovenbaked varities of brick are included. Sun-dried
bricks are, however, required to undergo a further
treatment, namely, the burning process to become bricks
proper. They are thus an intermediate stage of bricks as
understood in common parlance and are goods in the ordinary
sense of the term being a commercial commodity. [276G-H; C]
273
Lilavati Bai v. The State of Bombay, [1957] SCR 721;
Gulraj Singh v. Mota Singh, [1964] 7 SCR 205; Dy.
Commissioner, Sales Tax, v. Plo Food Packed, [1980] 3 SCR
1271 and Indian Carbon Ltd. v. Superintendent of Taxes,
Gauhati, 11972] 1 SCR 316, referred to.
When sun-dried brick is purchased on payment of sales-
tax and purchasing dealer burns the same and sells the same
for a higher price, sales tax should be leviable on the sale
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5
price of such bricks. The amount of sales-tax paid when sun-
dried bricks were purchased, on production of appropriate
declaration can be deducted from the total amount of tax.
This would not prejudice the revenue of the State nor would
it bring about any additional liability unwarranted by law
so far as the dealer is concerned. [277C-E]
In the instant case the bricks which had been purchased
as sun-dried bricks were burnt by the appellant. He had thus
further treated the sun-dried bricks and produced goods of
added value. It would not be proper to extend the benefit of
total exemption for the turnover of sale of bricks from tax,
but it would be appropriate to allow set off of the tax paid
at the time of the purchase of the sun dried bricks, out of
the tax exigible on the taxable turnover of burnt bricks.
[277F-G]
If it is found that the appellant had paid sales tax on
the sun-dried bricks, the amount of tax then paid should be
given credit and the balance should be recovered from him.
The Taxing officer to hear parties and come to his
conclusion afresh. [277H; 274G]
The interest of the State would be properly protected
if the impugned notification is changed and so far as brick
is concerned necessary modification is made. Until that is
done, the State should adopt the modality indicated. [277G-
H]
JUDGMENT:
CIVIL APPELLATE JURISDlCTION: Civil Appeal No. 2375(NT)
of 1987.
From the Judgment and order dated 4.9.1984 of the
Punjab and Haryana High Court in Civil Writ Petition No.
2479 of 1984.
274
Anil B. Diwan and M.R. Ramachandran for the Appellant.
S.C. Mahanta, V.K. Mehta, C.V.S. Rao and Mahabir Singh
for the Respondents.
The following order of the Court was delivered:
O R D E R
Special leave granted.
The appellant is a registered dealer under the Haryana
General Sales Tax Act, 1973 (’Act’ for short) and is also a
licencee under the Haryana Control of Brick Supply order,
1972 (’order’ for short). In respect of assessment of sales-
tax for the accounting period 1981-82, it claimed deduction
of a sum of Rs.1,49,600.92 out of the gross turnover on the
ground that it had purchased sun-dried bricks from one
Sardool Singh, a registered dealer on payment of sales-tax
under the Act and that amount represented the sale price of
such tax-paid bricks. The claim was rejected by the
authorities under the Act. In the writ petition before the
High Court the claim was rejected on the ground that raw
bricks (i.e. unburnt bricks) did not come within the purview
of the notification of 5th May, 1973, issued by the State
Government in exercise of power vested under Section 18 of
the Act prescribing levy of tax at the first point in
respect of the named goods of which brick was one.
Two questions have been placed for our consideration:
(i) P whether as a fact the appellant has paid sales-tax on
the purchase of sun-baked bricks from the seller as claimed
and the appropriate declaration has been produced in the
assessment proceedings; and (ii) whether bricks used in the
notification of 1973 covered sun-dried bricks.
So far as the first question is concerned it is one of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5
fact and both parties have agreed that we may direct the
Taxing officer to hear parties and come to his conclusion
afresh. That situation would arise if we accept the
contention of the assessee on the other score. We shall,
therefore, proceed to examine the correctness of the other
contention.
275
The term ’Brick’ has not been defined in the Act. The
High Court has adopted the definition given in the order,
where it has been defined as ’piece of burnt clay having
geometrical shape fixed in a kiln’. It is not disputed that
the order has nothing to do with the Act. In the absence of
a statutory definition of the term ’Brick’, the common
parlance meaning of the word as found in dictionaries has to
be accepted. (See Lilawati Bai’s case 1957 SCR 721 and
Gajraj Singh’s case [1964] 7 SCR 205. Counsel for the
appellant also relied upon the decisions of this Court in
the cases of Dy. Commissioner, Sales Tax. v. PIO Food
Packed, [1980] 3 SCR 1271 and Indian Carbon Ltd. v.
Superintendent of Taxes, Gauhati, [1972] 1 SCR 3 16 in
support of his submissions. According to Collins English
Dictionary ’brick’ means ’a rectangular block of clay mixed
with sand and fired in a kiln or baked by the sun, used in
building construction’. New Webster’s Dictionary carries the
meaning of the word as: ’a block of clay usually
rectangular, hardened by the sun or by burning in a kiln and
used for building, paving etc.’ According to the oxford
English Dictionary ’brick’ means ’a substance formed of
clay, kneaded, moulded, and hardened by baking with fire, or
in warm countries and ancient times by drying in the sun’.
Encyclopaedia Britannica indicates that ’after the bricks
are formed, they must be dried to remove as much free water
as possible. Drying, apart from sun-drying, is done in drier
kiln with controlled, draft and humidity’.
We have on record the Schedule of Rates of the Haryana
Public Works Department of the contemporaneous time which
shows that while the rate per thousand of sun-dried bricks
was Rs.15, oven-burnt bricks of that quantity of the first
class cost Rs.75 five times more. The sun-dried bricks,
though a form of brick are not indeed the same as burnt
bricks. As seen above though they have many things common
with baked bricks, they are not a complete substitute
thereof. A customer in the market would not ordinarily be
prepared to accept the sub-dried bricks to meet his
requirement of bricks for house construction. As was rightly
pointed out by appellant’s counsel sun-dried brick is goods
of an intermediate stage.
We are satisfied that the High Court went in wrong
placing full reliance on the definition of the term ’Brick’
in the order and. H
276
therefore, the proper perspective of the issue for
determination has been lost sight of. For brick making,
cleaned clay and sand mixed in desired proportion are put
into sized frames and after the extra substance is removed,
the raw brick is taken out of the frame and is laid on the
field to dry up and become hard. If it intended to make hard
bricks, the same are stacked into a kiln and adequately
heated up by fire. There are various methods of burning the
bricks. If not burnt, the sun-dried bricks are not hard
enough to take good load. Sun-dried bricks are thus an
intermediate stage of bricks as understood in common
parlance and are goods in the ordinary sense of the term
being a commercial commodity.
Section 18 of the Act authorises the State Government
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5
by notification to direct that in respect of named goods,
tax under Section 15 of the Act may be levied at the first
stage of sale thereof and on the issue of such a
notification, tax on such goods shall be levied accordingly.
’Brick’ under the notification is taxed at the first point
of sale. The dealer claimed deduction on the basis of the
notification by maintaining that he had purchased the bricks
from the manufacturer and at that point had paid the tax.
Thus a second set of tax in the hands of the dealer was not
exigible. The reasoning given by the taxing authorities as
also the High Court cannot be sustained. As the counsel for
the appellant pointed that ’brick’ is a generic term; as per
the meaning of the term in common parlance and dictionaries
sun-dried bricks are bricks of a class and both varieties of
bricks can to a considerable extent be used for the same
purpose as substitute of one another. As the term ’Brick’
covers both sun-dried and oven-baked bricks, and there is no
definition in the Act, the contention of the appellant that
sun-dried bricks are a class of ’brick’ to which the
notification under Section 18 applies cannot be thrown out
as wrong.
We have already pointed out that though both the
varieties of brick are included in the generic term ’brick’,
the use to which these are put is not the same. We have also
pointed out that there is a considerable difference in the
price. Sun-dried bricks are required to undergo a further
treatment, namely, the burning process to become bricks
proper, when burnt, bricks are sold at a substantially
higher price to meet different demands in the market. The
appellant after purchasing sun-dried bricks has burnt them
and sold the same
277
for higher consideration. A
Learned counsel for the State rightly contended that if
sun-dried brick is accepted as ’brick’ within the meaning of
the notification, on the basis of the provision for taxing
at the first point in regard to sale of bricks, by paying
tax on the low consideration of sun-dried bricks, the dealer
would escape liability of sales-tax on the turn-over of
baked bricks. Undoubtedly this would be the position. We
accordingly suggested to counsel for the State that this
situation should be appropriately met and the interest of
the State would be properly protected if the notification in
questions changed and so far as brick is concerned,
necessary modification is made. Where sun-burnt brick is
purchased on payment of sales-tax and the purchasing dealer
(whose assessment is in issue) burns the same and sells the
same for a higher price, sales-tax should be leviable on the
sale price of such bricks. The amount of sales-tax paid when
sun-dried bricks were purchased on production of appropriate
declaration can be deducted from the total amount of tax.
This would not prejudice the revenue of the State nor would
it bring about any additional liability unwarranted by law
so far as the dealer is concerned. The impugned notification
would not serve the purpose indicated and would require
amendment. It is up to the State to take the requisite
steps.
Now what remains for consideration is: whether the
appellant would succeed in the claim for deductions. It is
not disputed by appellant’s counsel that the sale price of
bricks which had been purchased as sun-dried bricks and sold
for the price of Rs.1,49,600.92 were burnt by the appellant.
On the finding that the appellant had further treated the
sun-dried bricks and produced goods of added value, we do
not think it would be proper to extend the benefit of total
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5
exemption for the turn-over of sale of bricks from tax. The
notification of the State Government is somewhat misleading;
it would thus be appropriate to allow st-off of the tax
paid at the time of the purchase of the sun-dried bricks out
of the tax exigible on the taxable turn-over of burnt
bricks. While setting aside the judgment of the High Court
we would direct that until appropriate amendment to the
notification is made, the State should adopt the modality
indicated above. In the instant case if it is found that
appellant had paid sales-tax to Sardool Singh, the
278
amount of tax then paid should be given credit and the
balance should be recovered.
The appeal is allowed to the extent indicated above.
Parties shall bear their respective costs.
P.S.S. Appeal allowed.
279