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Why we need artificial definitions in fiscal law
October, 16th 2006

Definitions never define. That is how the saying goes. Some of the most difficult things to define in actual life are the most simple and well-known concepts such as man, courage, reform and so on. Man was defined by a philosopher as a laughing animal. No other animal laughs. Ultimately, mankind has settled for the definition as: Man is a rational animal. Courage could not be defined by a military general but by a philosopher. 
 
In the sixties and seventies, we did not have definitions in the Customs and excise tariff for distinguishing between rubber and resin, ash and dross, skelp and strip, paper and board and so on. There were innumerable controversies on these issues. Officers had to read technical books, consult chemists, engineers, specialists and experts but finally got nowhere near the solution to the problem of properly distinguishing their identity, until a solution was found in defining goods in the tariff itself. 
 
Natural definitions are very often illusory as technical books differ, understanding in different countries differ, and new products which do not conform to any conventional standard are being discovered by mixing several things with technological advance. 
 
In the process of classification of goods for the purpose of duty under excise, Customs, sales tax, VAT and service tax, that is, all indirect taxes, it is of utmost importance that such terms are used which are not amenable to different interpretations. How does one define as simple a thing as paper or food or vegetable for the purpose of tax? The question is relevant because food and vegetables are exempted from sales tax and excise since millions of vegetable or food sellers on open land cannot be brought under the tax net. 
 
While theoretically, it is settled that we should understand these trade goods for tax purposes by the understanding in market parlance, in practice it is not such a definitive solution. It is not clear what exactly is market parlance in very many cases. A solution has been attempted by incorporating definitions in the statute book itself. Once the statutory definition is there, it is binding on all concerned and there is no scope of resorting to the market definition or scientific definition. 
 
Even if the statutory definitions are artificial, they are to be followed. And more often than not, the statutory definitions are artificial. One of the reasons why the statutory definitions are necessarily artificial is that many products in the recent times have ceased to be natural and are artificial. 
 
They are mixtures of different products such as rubber and resin, leather and rubber (leatheroid), wood and resin, textile and resin etc. Such products cannot be easily identified or defined and not in any case by any natural standard. In such cases, the uncertainty can be resolved only by placing an artificial definition in the statute book. 
 
A classic example of an artificial definition is that of India for Customs purposes. India has been statutorily defined as not only the geographical mass but also the territorial waters of India. India geographically means the landmass and not the attached sea. If that meaning was taken for Customs purposes also, the result would be that the foreign ships would come very close to India and throw all the things they would like to smuggle to India.

Sukumar Mukhopadhyay

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