2013 (1) TMI 714 - HC - VAT and Sales Tax

Tax on aluminium rolled products such as sheets plates and foils - Held that - We are in agreement with the learned senior counsel for the petitioners that the order dated November 21 2008 cannot be treated to be a reasoned order. An omnibus observation has been made that in a number of cases aluminium rolled products had been held to be different from aluminium and that it also did not come under extrusions. The contention of the petitioners that in the context of entries in entry 26 of the Second Schedule the words extrusions of those would mean secondary products of aluminium like sheets plates foils etc. had also not been gone into. There is no manner of doubt that aluminium is a metal. Yet in entry 26 aluminium has been dubbed as a non-metal. So also copper and zinc. There is obviously a mistake.Treating any taxable commodity for tax under a taxing statute as a residuary item has to be mandated by legislative intent as well as necessitated by the textual context. It is neither a matter of routine nor of course. Such a course is permissible only if the commodity or the item is not amenable to any other classification. Thus set aside and quash the order dated November 21 2008 as well the assessment order and the consequential notice of demand. Respondent No. 2 will now pass a reasoned order on the application of the petitioners after affording an opportunity of being heard to the petitioners.

Summary

Issues Involved:
1. Validity of the assessment order dated January 6, 2009, and the consequent demand notice dated January 19, 2009.
2. Clarification of the tax rate on aluminium rolled products such as sheets, plates, and foils under the Assam Value Added Tax Act, 2003.
3. Determination of whether aluminium rolled products fall within the purview of entry 26 of the Second Schedule to the Act.

Analysis of the Judgment:

1. Validity of the Assessment Order and Demand Notice:
The writ petitions challenge the assessment order dated January 6, 2009, passed by the Superintendent of Taxes, Unit D, which levied taxes and interest, and the consequent demand notice dated January 19, 2009. These orders relate to the assessment years 2006-07, 2007-08, and 2008-09 with corresponding demands of Rs. 18,24,900, Rs. 17,14,824, and Rs. 3,82,860 respectively. The petitioners argue that these orders are based on an erroneous interpretation of the applicable tax rate for aluminium rolled products.

2. Clarification of the Tax Rate on Aluminium Rolled Products:
The petitioners also challenge the order dated November 21, 2008, passed by the Commissioner of Taxes, Assam, which clarified that aluminium rolled products such as sheets, plates, and foils do not fall under entry 26 of the Second Schedule to the Act and are taxable at the rate of 12.5 per cent. The petitioners contend that these products should be taxed at the rate of 4 per cent as per entry 26.

3. Determination of Classification under Entry 26 of the Second Schedule:
The petitioner-company, engaged in manufacturing and dealing in aluminium products, paid tax at the rate of 4 per cent on the sale of aluminium rolled products, treating them as covered under entry 26 of the Second Schedule to the Act. However, the jurisdictional Superintendent of Taxes, upon inspection, seized documents on the grounds that the petitioner-company had accounted for sales at a lower tax rate, resulting in underdeclaration of tax liability. The Superintendent issued a notice requiring the petitioners to show cause why the turnover should not be taxed at 12.5 per cent instead of 4 per cent.

The petitioners filed a petition under section 105 of the Act seeking clarification on whether aluminium ingots, wire rods, and rolled products fall within entry 26. The Commissioner's order clarified that aluminium rolled products are taxable at 12.5 per cent, while aluminium ingots and extrusions like wire and rod are taxable at 4 per cent.

Judicial Precedents and Interpretations:
The petitioners relied on several Supreme Court decisions to argue that aluminium rolled products should be classified under entry 26. In Kalidas Sheet Metal Industries P. Ltd. v. State of Kerala, the Supreme Court held that copper and brass sheets are not distinct from copper and brass. Similarly, in State of Madhya Bharat v. Hiralal, the Court held that "iron and steel" includes bars, flats, and plates.

The court also referred to its own decision in Steel Stores, where it was held that aluminium sheets, which are rolled products, cannot be considered finished products in the absence of evidence.

Court's Conclusion:
The court found that the Commissioner's order dated November 21, 2008, lacked detailed reasoning and failed to address the petitioners' contentions adequately. The court noted that aluminium is a metal, yet it was classified as a non-metal in entry 26, indicating a possible mistake.

The court emphasized that treating a taxable commodity as a residuary item requires clear legislative intent and textual context. Therefore, the court set aside the Commissioner's order, the assessment order, and the demand notice, directing the Commissioner to pass a reasoned order after giving the petitioners an opportunity to be heard. This process should be completed within three months.

Final Judgment:
The writ petitions are allowed to the extent indicated, and no costs are awarded.