Gypsum board is covered in amended Entry 56 Schedule IV of RVAT, read as ‘gypsum in all its forms’-Supreme Court
ABCAUS Case Law Citation:
ABCAUS 2704 (2019) (01) SC
Important Case Laws Cited/relied upon:
Commissioner of Sales Tax, Mumbai v. India Gypsum Ltd.
Trutuf Safety Glass Industries v. Commissioner of Sales Tax
State of Gujarat v. Sakarwala Brothers
State of Jharkhand and Ors v. LA Opala R.G. Ltd. (2014) 15 SCC 136
Rajasthan Roller Flour Mills Assn v. State of Rajasthan 1994 Supp.(1) SCC 413
Alladi Venkateswarlu & Ors. v. Govt. of Andhra Pradesh & Ors (1978) 2 SCC 552
Tungabhadra Industries Ltd. v. The Commercial Tax Officer,
Under the Rajasthan Value Added Tax Act, 2003 ( ‘RVAT’), Entry 56 of Schedule IV specified ‘Gypsum’ as a taxable entity, at the rate of 4%. This Entry was, however, amended and substituted to expand the meaning of Entry 56 of Schedule IV of the RVAT by changing it to ‘Gypsum in all its forms’.
The question before the Hon’ble Supreme Court was whether ‘gypsum board’ would fall within Entry 56, and be taxed at 4%, or whether it would fall in the then residuary Entry 1 of Schedule V, to be taxed at 12.5%?
In the instant case, the on a sale of gypsum board made with the VAT rate at 4%, it was alleged by the VAT 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.
Both, the Deputy Commissioner (Appeals) and Rajasthan Tax Board did not give relief to the assessee. However, the Rajasthan High Court reversed overruled their views.
The Hon’ble Supreme Court opined that to truly appreciate the controversy at hand, two aspects had to be kept in mind. Firstly, the change of the Entry by a conscious decision of the legislature, whereby the Entry of mere ‘gypsum’ was changed to ‘gypsum in all its forms’ which certainly signified that something more than basic gypsum was sought to be included in the Entry by referring to ‘gypsum in all its forms’. In essence, the conclusion to be drawn was whether ‘gypsum board’ would fall in the expanded definition of ‘gypsum in all its forms’ or whether it is completely a different product. Secondly, the Hon’ble Supreme Court opined that original composition of gypsum, and how does the processing convert it into gypsum board, would have to be examined.
A full Bench of the Hon’ble Supreme Court headed by CJI opined 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’
The Apex Court stated that it could 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 Hon’ble Supreme Court observed that it had observed that where a distinction is sought to be made between the words ‘in all forms’ as juxtaposed to the expression ‘all kinds’. The words ‘all kinds’ are said to be restricted to multiple items of the same kind, while the expression ‘in all forms’ is to multiply the same commodity into different forms. Therefore, different ‘forms’ of gypsum would get included in the expression ‘in all forms’.
The Hon’ble Supreme Court opined that to fully understand the scope of Entry 56 of Schedule IV of the RVAT, we have looked into the manufacturing process of gypsum board. ‘gypsum board’ is defined as real gypsum between two paper sheets. It would not take away from the description of gypsum. Even if the sheets are added, the wide description ‘in all its forms’ would certainly include ‘gypsum board’.
The Hon’ble Supreme Court observed that several decisions 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 and to take a contrary view 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.
The Hon’ble Supreme Court pointed out 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.
The Hon’ble Supreme Court opined that 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.