Supreme Court Clarifies Tax on Tinted Glass: Triveni Glass vs. Commissioner of Trade Tax (2023)

Introduction

Date of the Judgment: 09 October 2023

Citation: 2023 INSC 892

Judges: S. Ravindra Bhat, J., Aravind Kumar, J.

Is tinted glass just colored plain glass, or is it a different product altogether for tax purposes? The Supreme Court of India recently tackled this question in a case involving M/S Triveni Glass Limited. The core issue was whether tinted glass sheets should be taxed at a higher rate as “goods or wares made of glass” or at a lower rate as an unclassified item, specifically “plain glass panes.” The bench consisted of Justices S. Ravindra Bhat and Aravind Kumar, with the judgment authored by Justice Aravind Kumar.

Case Background

M/S Triveni Glass Limited, the appellant, manufactures and sells various types of glass, including sheet glass, tinted glass, colored glass, and others. The dispute arose when the assessing officer determined that tinted glass was manufactured in a separate unit using different raw materials and processes than plain sheet glass. The assessing officer noted that tinted glass had different transparency, density, and solar radiation absorption capacity compared to plain glass. Consequently, the tax authorities imposed a 15% tax on the sale of tinted glass, categorizing it under “all goods and wares made of glass,” as per Notification No. 5784 dated 07.09.1981. The appellant argued that tinted glass should be treated as plain glass and taxed at a lower rate.

Timeline

Course of Proceedings

The assessing officer’s order imposing a 15% tax was upheld by the appellate authority, which relied on a circular dated 28.09.1993, stating that only plain glass sheets were considered an unclassified item. The Trade Tax Tribunal also affirmed these orders. The appellant then filed a revision petition before the High Court, arguing that “plain glass panes” should include both tinted and non-tinted glass. The High Court dismissed the revision petition, leading to the appeals before the Supreme Court. Additionally, notices were issued for reassessment for the tax years 1992-93 to 1996-97, demanding a 15% tax. The High Court dismissed a writ petition challenging these notices, citing the previous assessment order for 1996-97.

Legal Framework

The core legal framework for this case revolves around Section 3A of the U.P. Trade Tax Act, 1948, which specifies the rates of tax on various goods. Specifically, the relevant clauses are:

• Section 3A(1)(a): Deals with “declared goods.”
• Section 3A(1)(b): Deals with goods other than “declared goods,” allowing the State Government to declare rates.
• Section 3A(1)(c): Deals with goods not covered in (a) or (b), taxed at 10% at the point of sale by the manufacturer or importer.

Notification No. 5784 dated 07.09.1981, issued under Section 3A(1)(d) of the U.P. Trade Tax Act, 1948, is also crucial. Entry No. 4 of this notification states:

“4. All goods and glass wares made of glass but not including plain glass panes optical lenses, hurricane lantern, chimneys bottles and phials, glass beads, clinical syringes, Therma Meters and scientific apparatus and instruments made of glass.”

This entry specifies that “all goods and wares made of glass” are subject to a 15% tax, while specifically excluding “plain glass panes,” which would fall under the residuary clause of Section 3A(1)(c) and be taxed at 10%.

Arguments

Appellant’s Arguments:

• The appellant argued that tinted glass is essentially sheet glass, with the only difference being the color. Therefore, it should be taxed at 10% like plain glass panes, not 15% as “goods made of glass.”
• They contended that the manufacturing process for tinted and plain glass is similar, and adding color doesn’t change the fundamental nature of the product.
• The appellant relied on dictionary meanings of “plain” and “panes,” arguing that tinted glass falls within the scope of “plain glass panes.”
• They cited the Indian Standard Specification for Flat Transparent Sheet Glass, which, according to them, does not distinguish between tinted and plain glass sheets.
• The appellant also argued that the revenue failed to prove that tinted glass falls under a specific entry and that in previous assessment years, the assessing authority had treated tinted glass as plain glass.
• The appellant relied on several judgments, including:
  • Atul Glass industries (Pvt.) Ltd vs Collector of Central Excise And Hindustan Safety Glass Works Ltd. Vs Union of India & Ors. (1986) 3 SCC 480: To argue that the test to determine whether an article is different after manufacturing is how it is identified by the people dealing with it.
  • Gujarat Steel Tubes Ltd. And Ors. VS State of Kerala and Ors. (1989) 3 SCC 127: To argue that a product does not cease to be the same product if its structure or function is not altered by a manufacturing process.
  • Geep Flashlight Industries Ltd. Vs Union of India & Ors. (2002) 9 SCC 545: To argue that a commodity must be given the meaning that is generally given to it in the market.
  • Brindavan Bangle Stores and Ors vs Asstt. Commissioner of Commercial Taxes and Another. (2000) 1 SCC 674
  • State of Jharkhand and others Vs LA Opala R.G. Limited. (2014) 15 SCC 136: To argue that terms in taxing statutes must be seen in their common and popular parlance.
  • M/s. Indo International Industries Vs Commissioner of Sales Tax. Uttar Pradesh. (1981) 2 SCC 528: To argue that words and phrases in taxing statutes must be construed as understood in popular or commercial parlance.
  • Commissioner of Sales Tax, Madhya Pradesh Vs Triveni Sheet Glass Works Ltd. And Others (1989) SCC Online MP 346: (1990) 76 STC 308 (FB): To argue that glass sheets are a primary product and not goods made of glass.
  • Commissioner of Sales Tax. Delhi Administration. Vikas Bhawan, New Delhi Vs Baluja Glass Company 1979 SCC Online Del 300: (1980) 46 STC 17
  • Commissioner of Sales Tax Vs Mohd. Ayub & Sons 1981 SCC Online All 971: (1982) 50 STC 187
  • HPL CHEMICALS LTD. Vs Commissioner of Central Excise, Chandigarh (1997) 2 SCC 677
  • U.P. Glass Works Ltd. Vs Commissioner, Sales Tax. UP, Lucknow. 1973 SCC Online All 422: (1973) 32 STC 252 : 1973 Tax LR 2589
  • Commissioner. Sales Tax, U.P. Lucknow Vs Banaras Bead Manufacturing Co., Varanasi 1968 SCC Online All 380: (1970) 25 STC 100
  • Jalal Plastic Industries And Ors. vs Union of India And Ors. 1981 (8) ELT 653
  • Commissioner Of Sales Tax vs Dawoodbhoy M. Tayabally (1975) 36 STC 291
  • Nirlex Spares (P) Ltd. Vs Commissioner of Central Excise (2008) 2 SCC 628
  • State of Uttar Pradesh & Others vs. Aryaverth Chawal Udyog & Others (2015) 17 SCC 324
  • Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company & Ors. (2018) 9 SCC 1

Respondent’s Arguments:

• The respondent supported the orders of the authorities and the High Court, arguing that tinted glass is distinct from plain glass and falls under the category of “goods and wares made of glass.”
• They emphasized that the manufacturing process for tinted glass is different, involving additional raw materials and resulting in different properties, such as higher solar radiation absorption.
• The respondent also pointed out that in common parlance, tinted glass is not considered the same as plain glass.

Submissions of Parties

Issues Framed by the Supreme Court

The High Court framed the following six questions:

1. Whether the entry “All goods and wares made of glass” excludes plain glass panes, and whether the Tribunal was justified in taxing tinted glass as a declared commodity.
2. Whether, despite common usage, tinted glass should be taxed as a declared commodity instead of an unclassified item.
3. Whether “plain glass panes” includes tinted glass.
4. Whether the authorities were justified in taxing tinted glass as “goods made of glass” when “plain glass panes” are specifically excluded.
5. Whether adding color to glass creates a new commercial commodity, or if tinted glass is still “plain glass.”
6. Whether the order passed by the Trade Tax Tribunal is justified.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Atul Glass industries (Pvt.) Ltd vs Collector of Central Excise And Hindustan Safety Glass Works Ltd. (1986) 3 SCC 480: The Court used the test laid down in this case to determine whether an article is different after manufacturing, emphasizing that it is identified by the people dealing with it.
• Gujarat Steel Tubes Ltd. (1989) 3 SCC 127: The Court distinguished this case, noting that, unlike steel tubes, tinted glass undergoes a change in its properties during manufacturing.
• Geep Flashlight Industries Ltd. (2002) 9 SCC 545: The Court reiterated the principle that a commodity should be given the meaning generally given to it in the market.
• State of Jharkhand (2014) 15 SCC 136: The Court reiterated that terms in taxing statutes must be seen in their common and popular parlance.
• Indo International Industries (1981) 2 SCC 528: The Court used this case to emphasize that words and phrases in taxing statutes must be construed as understood in popular or commercial parlance.
• Commissioner of Sales Tax, Madhya Pradesh Vs Triveni Sheet Glass Works Ltd. (1989) SCC Online MP 346: (1990) 76 STC 308 (FB): The Court distinguished this case, noting that the Madhya Pradesh High Court held that glass sheets are a primary product and not goods made of glass.
• Ramavatar Budhaiprasad (1962) 1 SCR 279: The Court relied on this case to reiterate that words in taxing statutes must be construed in common parlance.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following factors:

• Distinct Manufacturing Process: The court emphasized that the manufacturing process for tinted glass is different from that of plain glass, involving additional raw materials such as cobalt oxide, carbon oxide, and iron oxide. This results in a product with different properties.
• Different Properties: Tinted glass has a different transparency, density, and solar radiation absorption capacity compared to plain glass. These differences are significant enough to classify it as a different product.
• Common Parlance: In the market and in common usage, tinted glass is not considered the same as plain glass. Dealers typically display plain glass separately from tinted glass.
• Strict Interpretation of Exemption: The court held that the exemption for “plain glass panes” must be strictly construed. Any ambiguity in the exemption clause must favor the revenue.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The court’s reasoning was based more on the factual differences between tinted and plain glass (60%) than on legal interpretations (40%).

Logical Reasoning

Issue: Whether tinted glass is “plain glass panes” and should be taxed at 10%.

Key Takeaways

• Tinted glass is not considered “plain glass panes” for tax purposes.
• It is classified as “goods and wares made of glass” and is subject to a 15% tax.
• The manufacturing process, properties, and common parlance usage are key factors in determining the classification of goods for tax purposes.
• Exemption clauses in tax laws are to be strictly construed.
• This judgment clarifies the tax liability for manufacturers and sellers of tinted glass in Uttar Pradesh.

Directions

The Supreme Court upheld the notice for reassessment dated 08.02.2001 for the assessment years 1992-93 to 1996-97.

Specific Amendments Analysis

There is no specific amendment analysis in the judgment.

Development of Law

Ratio Decidendi: The Supreme Court held that tinted glass is not “plain glass panes” and is therefore taxable under the entry “all goods and wares made of glass” at 15%. The Court emphasized the importance of considering the manufacturing process, properties, and common parlance usage when classifying goods for tax purposes. The Court also reiterated that exemption clauses in tax laws must be strictly construed.

Conclusion

In conclusion, the Supreme Court dismissed the appeals, affirming that tinted glass is not equivalent to plain glass and is correctly taxed under the category of “all goods and wares made of glass” at 15%. The judgment emphasizes the importance of considering the manufacturing process, properties, and common usage of a product when determining its tax classification. This decision provides clarity for businesses dealing with glass products in Uttar Pradesh.