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TMI Blog2008 (7) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... 01] 9 KTR 349. In the second appeal filed by the Revenue, the Appellate Tribunal has taken the view, that, since craft paper is sold to carton manufacturers for the manufacture of packing materials, the commodity in question requires to be classified as an item falling under entry 94(ii) of the First Schedule to the KGST Act and accordingly, has allowed the Revenue's appeals and has confirmed the orders passed by the assessing authority for the assessment years 1994-95, 1995-96, 1996-97, 1997-98, and 1998-99. The petitioner is a company incorporated under the provisions of the Companies Act, 1956. It is also a dealer registered both under the Kerala General Sales Tax Act and the Central Sales Tax Act, 1956. The assessee is engaged in the production and sale of craft paper and the product is mainly sold to carton manufacturers. The common issue involved in all these revision petitions is the rate of tax on the sale of craft paper. The relevant entries are: Sl. No. Description of goods Point of levy Rate of tax 94(i) Paper At the point of first sale in the State by a dealer who is liable to tax under section 5 4% 94(ii) Newsprint, cardboard, paper products, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, T.A. Nos. 11 of 2003, 528 of 2003, 529 of 2003 and 429 of 2003 are to be allowed setting aside the order of the first appellate authority and restoring the order of the assessing authority." The assessee in these revision petitions has raised the following questions of law for our consideration. They are: "(i) Whether the Tribunal was right in law and on facts in holding that the kraft paper sold by the petitioner was an item classifiable under entry 94(ii) of the First Schedule to the KGST Act attracting tax at the rate of five per cent? (ii) Ought not the Tribunal to have held that the correct classification of the kraft paper sold by the petitioner falls under entry 94(i) of the First Schedule to the KGST Act, more so in view of the decision of the honourable Supreme Court Khatema Fibres Ltd. v. State of Uttar Pradesh [2004] 135 STC 193; [2001] 9 KTR 349?". "Craft paper" is a paper produced by the kraft process from wood pulp. It is strong and relatively coarse. Craft paper is usually brown in colour, but can be bleached to produce white paper. The kraft process describes a technology for conversion of wood into wood pulp consisting of almost pure cellulose fibres. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore requires to be classified under item 94(i) of the First Schedule to the KGST Act and taxable only at the rate of four per cent. The Appellate Tribunal while negativing the claim of the assessee has applied the principles stated by the Supreme Court in Khatema Fibres Ltd. v. State of Uttar Pradesh [2004] 135 STC 193; [2001] 9 KTR 349 (SC). The contention of Sri Anil D. Nair, learned counsel for the assessee, is that "craft paper" is a paper and therefore, falls under item 94(i) of the First Schedule to the KGST Act and taxable only at the rate of four per cent. In aid of his submission, the learned counsel has relied on the observations made by the apex court in Khatema Fibres Ltd.'s case [2004] 135 STC 193; [2001] 9 KTR 349. Per contra, Sri Vinod Chandran, learned Government Advocate submits that, since the assessee has effected sales of craft paper primarily to a dealer engaged in the business of carton manufacture, the commodity in question necessarily has to be classified as paper product. Let us now first deal with the case law on which reliance is placed by learned counsel for the assessee, Sri Anil D. Nair. In Khatema Fibres Ltd.'s case [2004] 135 STC 193 (SC); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only as packing material." Now, let us see whether the observations made by the apex court can be applied for deciding the issue raised in these revision cases. Section 5 of the Act is the charging provision. It envisages that every dealer, other than a casual trader or agent of a non-resident dealer whose total turnover for a year is not less than two lakhs of rupees and every casual trader or agent of a non-resident, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year, in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedule. Item 94 of the First Schedule to the Act is in two parts. Item 94(i) speaks of "paper". It is appropriate to state that the normal legislative practice whenever such expressions are used in the entries attached to the Schedule to the Act, is to use the expression immediately after using generic name of the commodity, "paper of all kinds", but, whenever they included or excluded certain types of paper, it was made clear by appropriate provision. In the absence of any inclusion or exclusion in the expression, "paper", it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the "user test" is logical; but is again, inconclusive. The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods. A Bench of the Gauhati High Court in the case of Shri Chitta Ranjan Saha v. State of Tripura [1990] 79 STC 51, applying the principles laid down in Annapurna Carbon Industries Co. v. State of Andhra Pradesh [1976] 37 STC 378 (SC) and the decision in Mukesh Kumar Aggarwal Co. v. State of Madhya Pradesh [1988] 68 STC 324 (SC), has stated that "user test", i.e., the test, the use to which the goods can be put, can also be considered in interpreting an item in taxing statute. However, this rule of interpretation has got its own limitations. Certain goods may be put to different uses by different persons. That cannot entitle the Revenue to apply different rules of tax to the sales of the very same product by different dealers depending on the use to which they will be put to use by the purchasers. The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods. To apply this test, the deciding factor has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the same sub-entry, the framers of the entry have grouped paper products, note books, etc. If the entry is read carefully, we are of the considered opinion, the intention of the framers of the entry is to treat the products produced with or out of paper and sold to be taxed at the higher rate, namely, at five per cent. It could be cartons made out of paper, grocery bags made out of paper, multiwall sacks, envelops, etc. Grocery bags are usually made of craft paper for packing light materials. It may not be out of place to state here, that, the tradition of the paper craft in India is fairly old. The paper with its various varieties and wide range of colours offers a very colourful choice to the craftsmen. The combination of different colours of papers in different forms and styles makes paper craft one of the best crafts in India. The paper craft in India has widely been used in different types of decorations. The decorations may be in the form of flowers, kandeels, kites, etc. These paper products are sold in the market as paper products. As we have already noticed, after referring to the dictionary meaning, the word "product" means anything produced or obtained as a result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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