By TIOL News Service

JAIPUR, APR 20, 2015: THE issue before the Bench is - Whether 'marker' & 'highlighter' would fall in the category of "all types of pen", for the purpose of levying tax at the rate of 8% . YES is the answer.

Facts of the case

The assessee company is engaged in the business of manufacturing stationery items, namely marker & highlighter, carbon paper, stamp pad & ink of stamp pad, covert & eraser, for being used by the general public, students and others for the purpose of writing. The AO was of the view that marker & highlighter did not fall in the category of pen and since it was not a pen, it was not exempt and falls in the definition of stationery on which tax @ 4% would be leviable. In so far as carbon paper was concerned, the assessee claimed it to be part of the stationery and the tax leviable was @ 4%. However the AO was of the view that since carbon paper/stamp pad was not separately shown anywhere, therefore, the tax @ 10% would be applicable which falls in the residuary/general clause. In so far as the stamp pad & ink of stamp pad was concerned, the assessee claimed it to be stationery with the tax @ 8% which was being charged earlier, whereas the revenue claimed it to be falling in the general category with the tax leviable @ 10%. On appeal, the DCA came to the conclusion that marker as well as highlighter falls within the definition of a pen and accordingly no tax would be leviable. In so far as the other three items were concerned, the DCA, on the basis of evidence available and dictionary meaning, came to the conclusion that all the three items namely; carbon paper, stamp pad & ink of stamp pad and covert (eraser) fall within the category of stationery and therefore, 4% and 8% rate of tax would be leviable as against the general rate of 10%. On further appeal, the Tax Board also sustained the order of DCA.

Having heard the parties, the High Court held that,

++ it is noted that as per notification dated 4th Mar, 1992 the category was "all types of fountain pens, ball pens and accessories thereof" and as per notification No.F.4(8)FDGR.IV/94-49 dated 7th Mar, 1994 it was exchanged to "all types of pens including parts and accessories thereof, drawing materials and poster colours." Therefore, the scope of pen was enlarged and marker as well as highlighter can fall within the meaning of a pen and by highlighter as well as marker one can certainly write though the flow by writing from a marker or a highlighter may not be to that extent but these are definitely instruments of writings. It is seen that the Apex Court in the assessee's own case, while considering the issue in the case of Camlin Limited Vs. Commissioner of Central Excise, Mumbai, observed that:

["....In view of the above definition of the words "write" and "writing" it reveals that the method by which the ideas are transformed into symbols, characters, letters or words on any surface including paper is to be considered as writing. Accordingly, Fountain pens, Marker Pens, Croquill Lettering Pens, Sketch Pens etc. are the instruments which are being used for transforming the ideas into symbols, characters, letters or words on paper and in that sense these are definitely the instruments of writing....Even if we see the uses of these instruments, we noticed that they are of multipurpose uses viz., Marker Pens are used for bold writing on notice board, packages, files, envelopes, charts etc. as well the same can be used in drawing also. The same case is with sketch pens, croquill lettering pens also. It can be used for writing purposes also...."]

++ therefore, in the light of the judgment of the Apex Court as also definition of marker and highlighter as given in oxford dictionary, the marker as well as highlighter will literally fall in the category of "all types of pens" and accordingly, the Tax Board has rightly considered the said issue in favour of the assessee and against the revenue. In so far as the other three items namely; carbon paper, stamp pad & ink of stamp pad and covert are concerned, the MP High Court in the case of Commissioner of Commercial Tax, Indore Vs. Modern Agency, while considering a case of interpreting entries in Taxation Statutes, observed that:

["....The expression "stationery" is not a legal term but it is a word taken by the Legislature from English language used by common man in commercial world. Though Oxford dictionary explains the meaning of this word to mean "materials for writing" e.g. paper, pens and envelopes", in our opinion, this definition cannot be construed to mean and confine its operation to what is specified in it. In other words, the definition cannot be read to mean that stationery means only "paper, pen and envelope". This definition has to be taken as illustrative in nature and therefore, anything alike or similar to what is mentioned in the definition or anything which is required to make effective use of these items in day-to-day use would be regarded as stationery. It is for the reason that in daily use, there are hundred of items which can be described as stationery articles and hence, it cannot be said that those items which are not mentioned in dictionary meaning cannot be termed as stationery article....In order to decide the actual utility as also use of commodity in the market and by its user, one is required to take pragmatic view of the whole scenario in its right perspective. In today's commercial world where technology and science has gone much ahead in every sphere, one cannot see a particular thing in a narrow sense...."]

++ the claim of the assessee is well justified as in the notification dt.26/03/1999, the category is "All kinds of paper, stationery, greeting/wedding and other printed cards" and therefore, all three items will fall within the category of stationery. The sales tax enactment is one which touches the common man and his everyday life. Therefore, the terms in the said enactment must be in the manner in which the common man will understand them. The word "stationery" in common parlance is defined in Concise Oxford English Dictionary to mean "paper and other materials needed for writing". Thus, in common parlance, (i) carbon paper, (ii) stamp pad & ink of stamp pad, (iii) covert (eraser) can certainly be called to be the items of stationery and the argument of counsel for the Revenue is wholly unjustified that they form part of the residuary clause rather than the head of "All kinds of paper, stationery, greeting/wedding and other printed cards" . The Apex Court, time and again, has held that while interpreting the entry for the purposes of taxation, recourse should not be made to the scientific meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. In so far as the classification of goods is concerned, the Apex Court in the case of HPL Chemical Ltd., has held that classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. It is noticed that in the present case, except that the Revenue claims that it falls in residuary/general clause, nothing has been brought on record so as to come to the conclusion that these items are not items of stationery, burden was on the Revenue. In view of the said conclusion, both the revision petitions of the Revenue are hereby dismissed.

(See 2015-TIOL-955-HC-RAJ-CT)