2022 (11) TMI 1360 - HC - VAT and Sales Tax

Classification of goods - Deep Freezers - to be classified under Entry 9 in Schedule VI and be taxed at the rate of 15% or under the residuary entry and taxed at 14% as was done by the assessee? - primary contention of the learned counsel for the revenue-petitioner is that as per common parlance test as per Google search and as per his opinion Deep Freezer will be included in the broad category of Air Conditioners and Refrigerators and be taxed at the applicable rate of 15%. HELD THAT - The entry wherein the Revenue wants to charge the goods in question is Air Conditioner and Refrigerator wherein applicable rate of tax is 15%. The respondent-assesse has self classified the said goods in Schedule V of RVAT Act under the residuary head wherein the applicable rate of tax is 14%. The Appellate Authority and the Tax Board after considering two important aspects; firstly that Deep Freezers and Refrigerators are two different products having different construction style different cooling temperature range different power supply different inner liner different outer cabinet material and having different utilities held that the two goods are different in nature and utility. Secondly they relied upon the Notifications dated 24.03.2005 08.03.2006 and 09.03.2011 wherein Deep Freezer was spelled out separately than Air Conditioner and Refrigerator as was also submitted by the learned counsel for the respondent-assesse. The Appellate Authority and the Tax Board after considering the said factors held that the goods in question would not be included in the entry of Air Conditioner and Refrigerator . On account of the reason that Deep Freezer are distinct product not covered under Air Conditioner and Refrigerator and that the notification dated 09.03.2011 specifically excluded Deep Freezer this Court is not inclined to interfere with the order impugned - In the case in hand the Revenue has not discharged their onus properly to show that Deep Freezer would be covered in the specific entry rather they have merely relied upon opinion of the assessing officer and have therefore not discharged the onus. The argument qua HSN was never raised before Appellate Authority or the Tax Board nor was it the foundation of the show cause notice or the order in original. Even if the HSN system adopted Deep Freezers cannot be considered in the specific entry of Air Conditioner and Refrigerator on account of the specific exclusion of Deep Freezer in the notification dated 09.03.2011. All these sales tax revisions are dismissed. Questions of law are answered in favour of the respondent-assessee.

Summary

Issues:
Classification of Deep Freezers under the entry of 'Air Conditioners and Refrigerator' for tax purposes.

Analysis:
1. The primary issue in this case is whether Deep Freezers fall under the specific entry of 'Air Conditioners and Refrigerator' for tax classification or should be considered under the residuary entry. The dispute arose from the assessment order classifying Deep Freezers under 'Air Conditioners & Refrigerator' at a tax rate of 15%, which was challenged by the assesse. The Appellate Authority and the Tax Board held that Deep Freezers should not be included in the 'Air Conditioners and Refrigerator' entry and should be taxed at 14% under the residuary entry.

2. The Revenue argued that common parlance test, Google search, and expert opinions suggest that Deep Freezers should be classified under 'Air Conditioners and Refrigerator' and taxed at 15%. They relied on Harmonized System Nomenclature (HSN) and legal precedents to support their position. However, the respondent-assesse contended that Deep Freezers were specifically excluded from the 'Air Conditioners and Refrigerator' entry in a notification, indicating a conscious legislative decision. They argued that Deep Freezers serve a unique purpose of freezing, not cooling, and should be classified under the residuary entry.

3. The Court considered the construction, utility, and differences between Deep Freezers and Refrigerators, as well as the notifications specifying the classification of Deep Freezers separately. The Appellate Authority and the Tax Board's reasoning was found to be sound and logical in determining that Deep Freezers are distinct products not covered under 'Air Conditioners and Refrigerator'. The Court held that the Revenue failed to show that Deep Freezers should be included in the specific entry, and therefore, upheld the lower authorities' decisions.

4. The Court rejected the Revenue's reliance on legal precedents as they did not apply to the present case where there was no conflict between entries. Additionally, the argument regarding HSN was dismissed as it was not raised earlier in the proceedings and would not change the classification of Deep Freezers. Ultimately, the Court dismissed the sales tax revisions and ruled in favor of the respondent-assesse, upholding the classification of Deep Freezers under the residuary entry.

5. The judgment provides a detailed analysis of the classification issue, considering various factors such as legislative intent, product differences, and notifications specifying classification. The Court's decision was based on a thorough examination of the arguments presented by both parties and the relevant legal principles governing tax classification.