The Sales Tax Act included paper in its schedule for levy of Sales Tax The question for determination was whether carbon paper can be levied Sales Tax ? Decide.

Facts in the Case

The Sales Tax Act included “paper” in its schedule as a taxable item.
The Sales Tax authorities levied tax on the sale of carbon paper, considering it to be covered under the term “paper”.
The seller challenged the levy, contending that carbon paper is a distinct commercial item and not the same as ordinary paper.
The core issue is whether carbon paper falls within the meaning of “paper” under the Act for the purpose of taxation.

Does the term “paper” as used in the Sales Tax Act include carbon paper?
Can carbon paper be treated as commercially identical to ordinary writing or printing paper?
What kind of interpretation should be adopted—literal, commercial, or functional?

While the literal meaning of “paper” might seem to include any paper-based material, courts often apply the commercial or popular meaning test in tax statutes.
Under the commercial parlance test, the word in question is interpreted as understood in the market by traders and consumers.

The Supreme Court held that technical or scientific meanings should not be used in tax statutes unless specifically defined.
Instead, the popular or commercial sense of the term must be used.

The Court emphasized the use of practical and commercial understanding in interpreting terms in taxation statutes.

Carbon paper is used not for writing or printing directly but for producing duplicate impressions.
It has a coating of ink or dye and is functionally different from standard writing paper.
In commercial parlance, carbon paper is treated as a separate commodity and not as paper per se.

The expression “paper” in the schedule to the Sales Tax Act should be interpreted in the sense in which it is commonly understood in trade.
Carbon paper, being a distinct commercial article with a different function, cannot be equated with ordinary paper.
Therefore, unless specifically included in the schedule by name or by category, carbon paper is not subject to tax under the entry “paper”.