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PETITIONER: T.V.L. NILSIN INDUSTRIES

       Vs.

RESPONDENT: STATE OF TAMIL NADU

DATE OF JUDGMENT:       28/07/1997

BENCH: S. P. BHARUCHA, V. N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.P. BHARUCHA, J.      These  appeals,   filed  by  assessees,  challenge  the correctness of the judgment and order of a Division Bench of the High  Court at  Madras. The  question  raised  in  these appeals is whether ultramarine blue is a pigment, so that it falls under Item 110 of the First Schedule to the Tamil Nadu General Sales  Tax Act,  1959, as contended by the Sales Tax authorities, or  a chemical, so that it falls under item 138 thereof, as  contended by  the  assessees.  The  High  Court referred to  decisions of  other High  Courts and came o the conclusion that  the stand  of  Sales  Tax  authorities  was justified.      Item 110 reads thus : ----------------------------------------------------------- Sl.  Description of the goods      Point of       Rate of No.                                levy           Tax % ------------------------------------------------------------ 110. Paints, colours, dry          At the point   10      distempers, varnishes and     of first sale      blacks cellulose lacquers,    in the state.      polish including metal      polishing bars (but not      boot polish), pigments,      indigo, enamels, cement      based waterpaints, oilbound      distemper, water pigments      finishes for leather, plastic      emulsion paints, turpentine      oil, bale oil, white oil and      thinners. ------------------------------------------------------------      Item  138  covers  dyes  and  chemicals  not  otherwise specified in the Schedule.      Our attention  was invited  by learned  counsel for the assessees to  the judgments of the Madhya Pradesh, Rajasthan and Gujarat High Court and we now refer to them seriatim.      In N.  Ganu Bhai  vs. Commissioner of Sales Tax, Madhya Pradesh, 36  S.T.C. 421, the dispute was whether ultramarine blue, or  "neel", was  taxable under  Entry 25 of Part II of

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Schedule II  of the  Madhya Pradesh  General Sales  Tax Act, 1958, or under the residuary entry in Part VI of Schedule II of that  Act. The  former entry at the relevant time covered dyes  and   the  Sales   Tax  authorities   contended   that ultramarine blue  was a dye and should be taxed as such. The High Court  referred to  the Concise Oxford Dictionary which stated that  ultramarine blue  was a pigment made from lapis lazuli. It referred to Chambers’s Encyclopaedia which stated that blue  pigments in  common use  by artists  consisted of native  and   artificial  ultramarine,   cobalt,  indigo  an prussian blue. It then referred to the dictionary meaning of ‘dye’. It found :      "13.  Ultramarine   blue   is   (a)      pigment  got   either  form  "lapis      lazuli" or  artificially by  mixing      clay, carbonate  of  soda,  sulphur      and resin,  (b) that  when obtained      from lapis lazuli or cobalt, it can      be permanent  and can  be  used  by      artists  for   painting  skies  and      distances in  landscapes, (c)  when      obtained   artificially    is   not      permanent, (d)  also the base for a      powder used by laundresses.      14. Treating  neel as  a dye arises      out of  the failure  to distinguish      "dye" in  its true  meaning from  a      pigment  and   from  the  "blue,  a      powder used  by laundresses".  This      powder cannot be used to impregnate      tissues when  the material  is in a      raw state  to yield  more permanent      results. It is not capable of being      fixed to  the fabric  as when it is      used on  the fabric it is fugitive,      not fast to light, nor resistant to      action of  water and is not capable      of diluting  acids or  alkalies. It      is not  seriously disputed acids or      alkalies.  It   is  not   seriously      disputed that  neel is  used  after      the clothes  are washed, usually at      the first  rinsing, and  that  with      each rinsing  it gets  washed away.      It cannot  resist or  withstand the      use of  detergents or even washing-      soda which  is alkaline  in nature.      Finally, it is neither a direct dye      nor a mordant."      The High  Court concluded that ultramarine blue was not a dye.      N. Ganu Bhai’s case considers whether ultramarine blue, or "neel"  is a  dye . In so doing it finds that ultramarine blue or  "neel" is  a pigment. The case, far from supporting the assessees, is against them.      In Assistant  Commercial  Taxes  Officer,  Jodhpur  vs. Rajasthan Chemical  Corporation, 65  S.T.C 356, the question was whether  ultramarine blue  or "neel" was included in the term ‘pigment’.  The Board  of Revenue  for Rajasthan,  from whose order  a reference  was made  to the  High Court,  had posed the  question whether  ultramarine blue  or "neel"  in common parlance was covered by the expression "pigment". The Board had  not gone into the question but had relied upon on an  earlier   decision  where   the  Board   had  held  that ultramarine blue  could not be considered to be pigment. (No

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details of  the material  that was  before the  Board on the earlier occasion  are set out in the High Court’s judgment). The High  Court said that the word "pigment" in the relevant entry had  been used  along with dyes, paints, varnishes and dry colours.  The dictionary  meaning of  the word "pigment" was "any  substance used  for colouring  : that  which gives colour to  animal and  vegetable  tissues".  Pigment  brown, pigment caramine,  pigment chrome  yellow, etc. were used to convey colouring, by particular colours. Ultramarine blue or ‘neel’ was  not a  colour. In  common parlance,  ultramarine blue or  ‘neel’ was understood as a substance which was used to whiten clothes. It was not understood as a colour. It was a whitening agent for laundry purposes, used by washermen or by house-holders.  Ultramarine blue  was not  a colour as it was used  to whiten  clothes. Ultramarine  blue  was  not  a pigment.      We have some difficulty with the reasoning of Rajasthan Chemical Corporations’ decision. According to the High Court itself, ultramarine  blue is  used to  whiten clothes. We do not, therefore,  follow why  it is not a colour or colouring material or why it is not a pigment.      In Union  of India  7 Ors.  vs. C.M.C India, Ahmedabad, 1979 E.L.T.  298, considerable  evidence had been led by the assessee and  little  by  the  Sales  Tax  authorities.  The Gujarat High  Court noted  the evidence  of  the  assessee’s witness that  the terms  used in  the relevant  tariff entry were technical  terms, that is, terms used by technologists. This, the  High Court  said, supported  the assessee’s  case that "ultramarine  blue is  not known as a pigment in common parlance and that it is known only as ultramarine blue". The evidence showed that "only those persons who were conversant with properties of ultramarine blue may call it as a pigment in scientific  term, but  so far  as business  community  is concerned, it  is known only as ultramarine blue ........... Now, it  is found  from his  evidence and  other evidence on record that  ultramarine blue is used mainly for the purpose of heightening  the whiteness  of  things  to  which  it  is applied. Under these circumstances, even though according to the chemical  tests, it  can be  said to be a pigment, it is not known  as such  and in  the  business  community  or  by persons who  are dealing with it..... He further admits that in the  market, the  substances  in  question  is  known  as ultramarine blue  .........." The  evidence established, the High Court  said,  that  the  product  manufactured  by  the assessees was  known only  as ultramarine  blue by consumers and the commercial community. The Excise authorities had not been  able  to  controvert  by  evidence  the  case  of  the assessees that  the particular  product was  known  only  as ultramarine blue  not only  to the manufacturers and traders but even  to the  common  people.  In  the  absence  of  any evidence on  the point,  the High  Court said,  it would  be hazardous to  interpret the  term "pigment"  in the entry as suggested by the Excise authorities.      It seems  to us  that the  focus in the case before the Gujarat High  Court was  mis-directed. That  the  assessee’s product was ultramarine blue was not in dispute. What was in dispute was  whether utlramarine blue was known as a pigment or whether  it was considered to fall under some other broad or generic description.      The Madras  High Court  in the  judgment  under  appeal referred in  extenso to  the judgment  of a  learned  single Judge of  the Calcutta High Court in M/s. Nilsin Company vs. Collector of  Central Excise, 1984 ECR 928. The issue before the Calcutta  High Court  was whether ultramarine blue was a pigment for the purposes of assessment under item 14 (1) (5)

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The learned Judge said :      "(13). The respondents in paragraph      17 of  the  affidavit-in-opposition      have averred  that in  paints  like      emulsion paints  or  water  paints,      pigment   finishes   for   leather,      printing  ink,   textile  printing,      Ultramarine Blue  is compounded  in      larger proportion.  They have  also      set out  in paragraph  18 of  their      expression pigment given in various      Coating by  Paul Nylen  and  Edward      Sunderland,   ‘pigment’    as   the      ‘internationally accepted  term for      the powdered  material intended  to      be production  of paints,  printing      inks, plastic  materials,  rubbers,      vitrine enamels.’  In the said book      Ultramarine    Blue     has    been      classified  as   a  synthetic   and      inorganic pigment.  The respondents      have also relied upon Webster’s 3rd      International   Dictionary,   1968,      page    1714     which    describes      ‘pigment’, inter  alia as a natural      or synthetic  inorganic or  organic      substance  that  imparts  a  colour      including black  or white  to other      materials especially,  a powder  or      easily  powdered   substance  mixed      soluble and  used in making paints,      enamels    and     other    coating      materials,  inks,  plastic,  rubber      and also  for imparting opacity and      other desirable  properties as well      as colour.      (14)   After    the   hearing   was      concluded, the learned Advocate for      the petitioner placed before me the      Condensed Chemical Dictionary. 10th      Edn. revised  by Gessner G. Hawley,      published by  Van Nostrant Reinhold      Co. Incidentally,  the  respondents      in paragraph 17 of their affidavit-      in-opposition had  relied  upon  he      1953  edition   of  Van  Nostrand’s      Chemical   Dictionary    for    the      definition  of   ‘pigment’   as   a      colouring   substance.   The   said      Condensed    Chemical    Dictionary      Claims to  contain  three  distinct      types of  information, namely,  (i)      technical     descriptions     (ii)      extended  definition,   and   (iii)      descriptions or  identifications of      wide range  of trade mark products.      The said  Dictionary, in  my  view,      does not  support he  claim laid by      the petitioner.  Thus at  page 1068      of   the    said   Dictionary   the      properties of Ultramarine Blue have      been,  inter   alia,  described  as      "Inorganic pigment  ; blue powder ;      good alkali and heat resistance..."      The said  Dictionary  mentions  the

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    following uses  of Ultramarine Blue      : "Colorant  for machinery  and toy      enamels ;  white baking  enamels  :      printing  inks,   rubber  products,      soaps and laundry blues, cosmetics,      textile printing."  "Note : Used in      very low  percentage  to  intensify      whiteness of  white enamels  rubber      compounds, laundered  clothing etc.      by offsetting  yellowish undertones      ; gives  a  ‘blue’  rather  than  a      ‘yellow’ white".  According to  the      same  Dictionary,   the  expression      "Colorant" means any substance that      imparts colour  to another material      or mixture".  Colourants are either      dyes or pigments" (vide page 267 of      the book).  I may also refer to the      definition of  ‘pigment’  given  at      page  817  of  the  said  Condensed      Chemical Dictionary :-      "Any substance, usually in the form      of  a   dry  powder,  that  imparts      colour  in   another  substance  or      mixture,    Most    pigments    are      insoluble in inorganic solvents and      water... To qualify as a pigment, a      material   must    have    positive      colorant value."      The definition  given in  the  said      book  excludes  certain  substances      including       whiting.        Mr.      Bhattacharyya  is  not  correct  in      contending that Ultramarine Blue is      whiting because,  according to  the      said   dictionary,    whiting    is      entirely   a    distinct    product      consisting   of    finely   ground,      naturally     occurring     calcium      carbonate   derived   form   chalk,      limestone, etc. and used as filter,      putty, etc.  One of  the properties      of Ultramarine Blue is that it is a      whitener, i.e.  a white  pigment or      colorant  used  in  the  paper  and      textile industries  (vide Condensed      Chemical  Dictionary,  page  1096).      Therefore,  I   conclude  that  the      condensed Chemical Dictionary, 10th      Edn.,   relied    upon    by    the      petitioners shows  that ultramarine      Blue is  a pigment  having  various      uses one  of which  is whitening or      brightening textiles and clothes.      (15)      For     the     foregoing      reasons, I  conclude that  there is      overwhelming     evidence      that      Ultramarine  Blue   is  a  pigment.      Ultramarine Blue does no constitute      a separate  product as contended by      the petitioner.  People  conversant      with  and  dealing  with  the  said      product understand Ultramarine Blue      as a  pigment, i.e.  as a colorant.      It is  used for imparting colour to

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    various substances.  Thus, not only      from he stand-point of its physical      constituents  but   also  from  the      stand-point of its various uses and      of      popular       understanding      Ultramarine Blue  is a  pigment. In      this   connection,   it   is   also      necessary to note the comprehensive      manner in  which  the  entry  No.14      gave description of the goods which      were subject  to the  rate of  duty      specified in  the said  item.  Item      No. 14  (1) (5)  was broadly in the      form  of  a  residuary  clause  for      inclusion  of   pigments,  colours,      paints and  enamels  not  otherwise      specified. Thus, pigments, colours,      paints and  enamels which  have not      been mentioned  in  any  other  sub      items would  be covered  by Item 14      (1) (5)  of the  First Schedule  to      the Central  Excises and  Salt Act,      1944. Accordingly,  I hold that the      petitioner  is   not   entitled   o      challenge  the   validity  of   the      excise  duties   imposed  upon  the      product      Ultramarine       Blue      manufactured by  the petitioner. No      question also  arises of commanding      the respondents  to  refund  excise      duties    recovered     from    the      petitioner under  Item No.  14  (1)      (5) of  the First  Schedule to  the      Central Excises & Salt Act, 1944".      The Madras  High Court  in the  judgment  under  appeal rightly relied  strongly on the Calcutta High Court decision to come  to the  conclusion  that  ultramarine  blue  was  a pigment and, therefore, liable to sales tax under Item 110.      Neither the  assessees nor  the Sales  Tax  authorities place any evidence before the Tamil Nadu Sales Tax Appellate Tribunal or  before the  High Court.  They preferred to rely upon the decisions of the High Courts aforementioned. We are in no  doubt that  ultramarine blue  or ‘neel’ is a pigment, having regard  to the  dictionaries and literature mentioned in the  decisions which  we have  discussed above  and that, having regard  to its use as a whitener or colouring matter, it is popularly understood to be a pigment.      Accordingly, the appeals are dismisses with no order as to costs.