Case Note & Summary
The applicant, M/s Gopalanand Rasayan, a manufacturer of sulphuric acid and other chemicals, generated steam as a byproduct during manufacturing and sold it. The applicant classified steam as a chemical and collected sales tax at 4% under Entry No.233 of the notification issued under Section 41 of the Bombay Sales Tax Act, 1959. The Assessing Authority, however, held that steam was covered by Entry No.102 of Schedule C Part II, taxable at 10%, and assessed accordingly. The applicant's appeals were unsuccessful before the Tribunal, which rejected the contention that steam is a chemical. The Tribunal referred three questions of law to the High Court under Section 61(1) of the BST Act, 1959. The High Court, after hearing the parties, held that the common parlance test applies for classification of goods under sales tax. Steam, being water in gaseous form, is not understood as a chemical in common parlance. The burden of proof was on the applicant to show that steam falls under the chemical entry, which they failed to discharge. The court answered both questions in the affirmative, against the applicant, and upheld the levy of sales tax at 10%.
Headnote
A) Sales Tax - Classification of Goods - Common Parlance Test - Steam as Chemical - Bombay Sales Tax Act, 1959, Section 41, Entry No.233 - The issue was whether steam is a chemical taxable at 4% under Entry No.233 or a general good taxable at 10% under Entry No.102 of Schedule C Part II. The court held that steam is not a chemical in common parlance and the burden of proof lies on the assessee to show that the goods fall under a specific entry. The Tribunal's rejection of the applicant's contention was upheld. (Paras 1-5) B) Sales Tax - Burden of Proof - Classification of Goods - Bombay Sales Tax Act, 1959 - The court held that the burden is on the assessee to prove that the goods are covered by a specific exemption or lower rate entry. The applicant failed to discharge this burden. (Para 5)
Issue of Consideration
Whether steam is a chemical under the Bombay Sales Tax Act, 1959 and exigible to sales tax at 4% or 10%
Final Decision
Both questions answered in the affirmative, against the applicant. The levy of sales tax at 10% on steam is upheld.
Law Points
- Common parlance test
- classification of goods under sales tax
- burden of proof on assessee
- interpretation of exemption notifications
