Mariamman Industries vs State of Tamil Nadu

Ramanujam, J.—In this tax appeal filed by the assessees against the orders of the Board of Revenue, the question arises as to whether the

oil known as armature coil winding oil can be taken as varnish mentioned in item 110 of the First Schedule to the Tamil Nadu General Sales Tax

Act.

The assessees are dealers in armature coil winding oil for the assessment year 1974-75, their taxable turnover was determined at Rs. 32,952.

The assessing officer treated the said article sold by the assessees as coming under item 110 of the First Schedule to the Act and taxed the relevant

turnover accordingly. The assessees filed an appeal before the Appellate Assistant Commissioner contending that armature coil winding oil cannot

be classified as varnish and brought under item 110 of the First Schedule and it is liable to be taxed only at multi-point rate and as the turnover fell

below the taxable limit of Rs. 50,000, they are not liable to be taxed at all. The Appellate Assistant Commissioner accepted the contention of the

assessees and held that the substance called armature coil winding oil sold by the assessees is a spirit-based adhesive oil used for winding armature

coil, and, in the business circle, it is treated as an adhesive and not as varnish. The Appellate Assistant Commissioner also examined the oil

produced by the assessees and he found that it could be used only as an adhesive and that it has no use as varnish as generally understood in

common parlance. He, therefore, felt that it will not fall under item 110 of the First Schedule, and therefore, it has to be treated as multi-point

goods only and since the turnover of the assessees is less than Rs. 50,000, which is the taxable limit, the assessment made on the assessees was

cancelled. The Board of Revenue thereafter called for the records of the Appellate Assistant Commissioner, and in exercise of its suo motu

powers, cancelled the orders of the Appellate Assistant Commissioner and restored the order of the assessing authority on the ground that the

Appellate Assistant Commissioner was in error in treating the product sold by the assessees as not a varnish. According to the Board of Revenue,

since the article like the one sold by the assessees has been referred as insulating spirit varnish in Indian Standards Specification, it should be taken

to be one kind of varnish and the expression ""varnish"" used in item 110 of the First Schedule being general, it will take in all kinds of varnish

including the insulating spirit varnish sold by the assessees. The view taken by the Board is under challenged before us in this appeal.

After due consideration of the matter, we are inclined to take the view that the armature coil winding oil sold by the assessees cannot be taken

as varnish so as to bring it under item 110 of the First Schedule. The Board appears to proceed on the basis, since the product in question contains

ethyl alcohol, it should be taken to fall within the term ""varnish"" which also contains ethyl alcohol. The other basis adopted by the Board of

Revenue is that since the armature coil winding oil has been referred to as insulating spirit varnish in Indian Standards Specification, it should be

treated as one kind of varnish, and therefore, it should be taken to fall under item 110 of the First Schedule. It is seen that the assessees are

producing the armature coil winding oil on the basis of D.L. 2 licence issued under the Tamil Nadu Denatured Spirit Methyl Alcohol and Varnish

(French Polish) Rules, 1959. The licence issued under form D.L. 2 enables the licensee to possess and use denatured spirit methylated

spirit/methyl alcohol either as such and/or for use in the manufacture of specified commodities other than varnish. As per the D.L. 2 licence

obtained by the assessees, they are not entitled to manufacture varnish. That shows the article manufactured by the assessees, namely, armature

coil winding oil, is not treated as varnish by the authorities administering the said Rules. The said Rules specifically provide for a separate form of

licence for the manufacture of varnish. D.L. 5 is the form of licence for the manufacture of varnish. That licence enables the licensee to possess and

use denatured spirit in the manufacture of varnish and use or sale of varnish. Thus, it is clear that the Tamil Nadu Denatured Spirit Methyl Alcohol

and Varnish (French Polish) Rules, 1959, makes a distinction between varnish and other articles manufactured out of denatured spirit. It is not,

therefore, possible to agree with the Board of Revenue that every article which is manufactured by use of ethyl alcohol or denatured spirit should

be taken to be varnish. According to the Rules, it is only the French polish which can be taken to be varnish and not all the commodities in the

manufacture of which denatured spirit is used as a raw material. Even assuming that the article sold by the assessees has been referred to in the

Indian Standards Specification as insulting varnish, that cannot straightaway be taken as a conclusive factor. The nature of the article and the use to

which it is put cannot be completely lost sight of. In this case, the article manufactured by the assessees is used only as an adhesive in the process

of armature coil winding and it is not used for polishing any surface. The varnish is normally understood as a substance which is used for polishing

wooden or metallic surface. The varnish which is to be applied to a surface is a substance which will quickly evaporate making the surface glassy.

Therefore, varnish is a substance used for a purpose different from the one for which the oil produced by the assessees is used. Having regard to

the nature of the substance and also the use to which it is put, the oil so produced and sold by the assessees cannot in any sense be called a varnish

which is used only for polishing purposes and not as an adhesive. It is well-established that a term occurring in a statute should be given a popular

meaning, i.e., a meaning by which a common man will understand the said term. Adopting the popular meaning, the term ""varnish"" can be taken to

refer to a substance which is used in polishing. If one were to go to a market and ask for varnish, no one will offer an adhesive, for, every one

knows the use for which varnish is put to and an adhesive cannot be an equivalent to a varnish.

We are not inclined to agree with the Government Pleader when he says that among the mechanics who deal with armature coils and undertake

the operation of armature coil winding know the adhesive which is produced by the assessees only as varnish. Even so, that will not be the popular

meaning. The fact that certain persons call a product as a particular kind of varnish cannot be taken as a popular meaning, a meaning that a

common man will attribute to that article. In our view, in this case, the Board of Revenue is not justified in revising the orders of the Appellate

Assistant Commissioner holding that the armature coil winding oil is not varnish. In this view, the order of the Board of Revenue is set aside, and

that of the Appellate Assistant Commissioner is restored. No costs.