Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh (1981)

This is a standard authority for the common parlance test: words in a taxing statute that classify goods are read in the sense in which people who deal in those goods understand them, not in a dictionary, scientific or technical sense. A hypodermic syringe is made of glass, and the dictionary says "glass ware" means "articles made of glass". Yet no dealer in glassware stocks syringes, and no buyer goes to a glassware shop for one. So syringes are not "glass ware". The case shows the test overriding the literal dictionary meaning.

The appellant manufactured and sold hypodermic clinical syringes. For the assessment year 1973-74 its U.P. sales were Rs. 95,065.

Up to 30 November 1973 the First Schedule had two competing entries: Entry 39, "Glass wares other than hurricane lantern chimneys, optical lenses and bottles", taxed at 10%; and Entry 44, "Hospital equipment and apparatus", taxed at 4%. Unclassified items were taxed at 3½%. From 1 December 1973 Entry 44 was deleted, so an item outside Entry 39 became an unclassified item under s. 3A(2A), taxed at 7%.

The assessee claimed 3½% (or 4% under Entry 44) for the period up to 30 November 1973 and 7% after that. The Sales Tax Officer treated syringes as "glass ware" and taxed the whole turnover at 10% under Entry 39. That was upheld in appeal and in revision; the revising authority followed the Allahabad High Court's decision in Commissioner of Sales Tax v. S.S.R. Syringes and Thermometers. The assessee appealed by special leave, relying on the contrary view of the Orissa High Court in State of Orissa v. Janta Medical Stores.

Could hypodermic clinical syringes be regarded as "glass ware" under Entry 39 of the First Schedule to the U.P. Sales Tax Act 1948?

The appeal was allowed, with no order as to costs.

The test

The Court stated the rule: "It is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical 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." A defined term is read as defined, "but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted."

It relied on two earlier decisions: Ramavatar Budhiaprasad v. Assistant Sales Tax Officer, Akola, holding that "vegetable" did not include betel leaves; and Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh, holding that "coal" included charcoal because merchants and consumers so understood it.

Applied to syringes

The Court accepted that the dictionary meaning of "glass ware" is "articles made of glass". "However, in commercial sense glass ware would never comprise articles like clinical syringes, thermometers, lactometers and the like which have specialised significance and utility." A general merchant dealing in glass ware does not ordinarily stock them; they are "normally available in medical stores or with the manufacturers thereof like the assessee." And "It is equally unlikely that consumer would ask for such articles from a glass ware shop."

Its conclusion: "the clinical syringes which the assessee manufactures and sells cannot be considered as \"glass ware\" falling within Entry 39 of the First Schedule of the Act."

The two High Court decisions

The Orissa High Court's view in Janta Medical Stores was held correct. The Allahabad High Court's view in S.S.R. Syringes and Thermometers was held "unsustainable".

Result on the tax

Turnover up to 30 November 1973 fell under Entry 44 ("hospital equipment") at 4%; turnover from 1 December 1973 to 31 March 1974 was taxable at 7% as an unclassified item.

In a revenue statute that classifies goods, an undefined word is given its popular or commercial meaning — the sense in which those who deal in the goods and those who buy them understand it — and not its scientific, technical or bare dictionary meaning. Articles of specialised use that the trade does not treat as belonging to a class do not fall within it merely because they are made of the material that names the class.

• Direct question: Explain the common parlance test in the interpretation of taxing statutes. State the rule in the Court's words, then give three examples: vegetable/betel leaves, coal/charcoal, glass ware/syringes.
• Contrast with the literal rule: the dictionary meaning pointed one way, the trade meaning the other, and the trade meaning won. Use this to show that in fiscal classification the plain meaning is the trade's meaning.
• Problem question: an undefined entry, and an article made of the listed material but sold only in specialist shops. Ask who deals in it and where a buyer would go for it.
• Note the limit the Court itself stated: where the Act defines the term, the definition governs; the common parlance test applies only in the absence of a definition.
• Cross-reference: read with The Empress Mills, Nagpur v. Municipal Committee, Wardha on the construction of taxing entries.