TMI Blog2015 (3) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... Under Clause (d), goods not falling under Clauses (a) or (c), tax is payable at the rate of 12.5% at the point of sale within the State. The legislature has conferred the power on the Government to notify a list of goods taxable at the rate of 12.5%. Harmonious construction of Clause (a) and (d) clearly demonstrates that in case of notified goods, the rate of tax would be 12.5%. Similarly, in case of goods not falling under Clause (a), that is Second and Third Schedule, the rate of tax would be 12.5%. It requires to be clarified here that this does not necessarily mean that exempted goods would be taxable by virtue of Clause (d). It is luculent that the commodities mentioned in the schedules have been allotted code numbers developed by International Customs Organisation, which is known as Harmonised System of Nomenclature (HSN). The same has been adopted in the Customs Tariff Act, 1975. Where the commodities have been given HSN numbers, the same meaning would be given for classification under the Customs Tariff Act, 1975. The rules accept that for certain entries, HSN numbers are not given. Where commodities are not ascribed any HSN number, they would be interpreted as understo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith water the goods continue to remain classified under the same HSN number. This means that the goods remain in list "A" of the Third Schedule. It may be noted that the position would have been totally different had the goods in question been separately and specifically itemized in SRO number 82/ 2006 dated 21st January 2006. The goods which are specifically mentioned in any of the entries of the said SRO, would be chargeable to tax @ 12.5%. But that is not the lis here, for the Revenue has included the goods in the residuary Entry 103 and the said entry, by no stretch of reasoning, can be made applicable. - High Court, has missed the issue in entirety and, therefore, we are obliged to dislodge the impugned judgment and orders. However, if any assessee-appellant has paid the amount of VAT to the State Government, they will not be entitled to get any refund of the said amount. - Decided in favour of assessee. - Civil Appeal No.1440 of 2010, C.A. No.3015/2015 (@ SLP (C) No. 28874/2011),C.A. No. 4815-4818/2012, C.A. No. 4565/2012, C.A. No.2869-2873/2015 (@ SLP (C) No. 11642-11646/2014), C.A. No. 4610-4616/2012, C.A. No. 4397-4409/2012 - - - Dated:- 18-3-2015 - Dipak Misra And Abha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only binding on the assessee, but also binding on the assesses who are similarly placed. Further, it is binding on the assessing authority. In cases of this nature, it is expected of the Commissioner to deal with the subject which is before him for clarification in detail and then offer his opinion by way of an order. In the instant case, the Commissioner has not done that exercise. This action of the Commissioner, in our opinion, is arbitrary, illegal and improper. Therefore, the order passed by the Commissioner requires to be set aside and the matter requires to be remitted back to the Commissioner for a fresh decision, keeping in view the observations made by us in the course of the order. 4. After the matter was remitted, the Commissioner considered all the materials furnished by the appellant and heard the matter at length. It was contended by the appellant that the scheme of VAT is materially different from that of KGST principally with respect to classification of goods for the purpose of levy of sales tax based on Harmonized System of Nomenclature (HSN), rate of tax applicable to different goods, etc. and resort to common parlance/commercial parlance test could be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anged and as far as the market is concerned this is a commodity holding distinct identity as a 'fabric whitener'. It may be true that on account of the term 'manufacture' as defined in the CET Act for the purpose of levying 'excise duty' the activities leading to the emergence of the product may not amount to manufacture on microanalysis of the term for the purpose of levying 'excise duty'. But the basic fact remains that the product marketed by the unit is not AVP in its original form as classified in the CET Act. The AVP with the changed character has not been assigned any separate HSN for the purpose of CET Act. Under no stretch of interpretation can it be said that for the mere reason that a product has not been assigned any separate HSN it should be treated as a commodity holding HSN by virtue of its mere presence. In this case Ujala whitener admittedly contains only a negligible portion (about 0.98%) of AVP. As stated above definitions and classifications in CET Act are exclusively for the purpose of levying excise duty. If a commodity comes outside the ambit of a classification made under CET Act, then the interpretation that could be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % category making the intention clear. And again The next question to be considered is in what sub entry the product in question is to be placed. The applicant had pointed out that in entry 27 of SRO 82/2006, the product 'laundry whitener' is mentioned only in the heading and not mentioned in the sub entries. By picking out the product 'laundry whitener' and including it specifically in the heading of the said entry, the intention is made specially clear. But since no specific HSN has been assigned to the products in question and the products are not specifically mentioned else where, it has necessarily to go under entry 103 i.e., the residual entry of SRO 82/2007 taxable at 12.5%. 6. In view of the aforesaid analysis, the Commissioner opined the products Ujala Supreme and Ujala Stiff and Shine are classifiable under Entry 103 of SRO 82/2006 and would attract tax at the rate of 12.5%. 7. The dissatisfaction with the aforesaid order led the assessee-appellant to file OTA No. 9 of 2007 before the High Court. The principal contention of the assessee-appellant before the High Court was that the notification i.e. SRO 82/06 which has been issued under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are being used in the fabric finishing industries for imparting brightness (bluish/purple tint) to white fabrics. 3. As such Ujala cannot be used as a dye or a colouring matter as it is because, the fundamental principle of acid class of dyes is that they do not show any substantivity to cotton and at the most they tint the fabric. 10. After reproducing the said report, the High Court referred to Entry 155, which falls under List A of the Third Schedule of the 2003 Act covering industrial inputs and packing materials. The High Court took note of the fact that the AV falls under Entry 155(8)(d) and is essentially an industrial input. The High Court referred to the order of Commissioner, wherein he has held that the acid violet paste is purchased by M/s. Jyothy Laboratories Ltd., a SSI unit, engaged in the manufacture of various products, including Ujala Supreme . While concurring with the view expressed by the Commissioner on the foundation that the finding recorded by him is consistent with the case put forth by the assessee, the High Court observed: The finding of the Commissioner is consistent with the appellant's own case that industrial inputs, namely, Acid V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal commodity for classification and, therefore, the view expressed by the Commissioner deserved to be accepted. 12. The High Court, as we find, has also separately discussed with regard to Ujala Stiff and Shine and opined that it is a laundry item used to impart crispness and shining of clothes and in common parlance is an agent which is a substitute for starch used for giving stiffness to clothes after washing the clothes. The High Court also referred to the test report obtained by the appellant from Shriram Institute for Industrial Research. The test result which has been referred to by the High Court in respect of Ujala Stiff and Shine is as follows: S.No. Tests Results 01. Polymerized vinyl acetate content, % w/ 42.98 02. Water content, % w/w 55.80 03. Solid content, % w/w 43.80 04. Fragrance (Rose) Present 13. Taking note of the stand and stance of the appellant that no manufacturing activity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, shall be liable to pay tax on his sales or purchases of goods as provided in this Act. The liability to pay tax shall be on the taxable turnover,- (a) in the case of goods specified in the Second and Third Schedules at the rates specified therein and at all points of sale of such goods within the State; (b) [xxxx] (c) [xxxx] (d) in the case of goods not falling under clauses (a) or (c) at the rate of 12.5% at all points of sale of such goods within the State. Government may notify a list of goods taxable at the rate of 12.5%. xxxx xxxx xxxx (8) The Rules of Interpretation of the Schedules of this Act shall be as set out in the Appendix. 17. From the aforesaid, it is quite clear that the provision deals with the levy of tax on sale and purchase of goods and provides various facets. It applies to an importer, casual trader, agent of a non-resident dealer, dealer in jewellery or gold, silver platinum group metals or silver articles or contractor of State Government or the Central Government, etc. regardless of the turnover. Under Clause (a), in respect of the goods specified in the second and Third Schedule, tax is payable at the rate specified in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. The commodities which are given eight digit HSN Number shall mean that commodity which bears that HSN Number. iv. As an exception to the above rules, there are certain entries in the Schedules, which bear the eight digit numbers but the four digit heading numbers of such commodities are given for some other commodities mentioned elsewhere. In such cases, the four digit heading shall include only those commodities under that heading excluding that commodity for which the eight digit numbers are given. Similar cases are available in the case of six digit numbers also. In such cases the above principles shall apply mutatis mutandis. v. Where the term 'other' is used in subentries or in sub-sub-entries, it should be construed by using the doctrine of ejusdem generis. (When specific words are followed by general words, the general words should be interpreted as having the meaning identical to the meaning attributed to the specific words). xxx xxx xxx xxx 43. The goods given in List A to Third Schedule as 'Industrial inputs and Packing Materials' shall attract the rate of tax applicable to Third Schedule regardless to the purpose for which such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toilet cleaner and Dettol. After enlisting the same, the Court referred to Section 6 of the 2003 Act, goods specified in Second and Third Schedule that are charged to duty at the rate specified therein. The two-Judge Bench also referred to the provisions in the Act about chargeability of duty when the goods do not fall within the said two schedules as per notification issued by the State Government. The controversy that arose before the Court was whether the enlisted items falls under Entry 44(5) read with Section 6(1)(a) of the 2003 Act. It was contended by the appellant that the items fell under Entry 44(5) which, at the relevant time, attracted duty at the rate of 4% whereas the stand of the Department was that the said items came under Section 6(1)(d) read with Notification No. 82/2006, Entry No. 66, which attracted the rate of duty at 12.5%. After recording the stand of the parties, the Court held: We have examined the impugned judgment. In this case, we find that the High Court in the impugned judgment has failed to notice the Rules of Interpretation which require that in cases where HSN code number is indicated against the tariff item mentioned in the Third Schedule, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes on account of tariff classification. Besides, since the tariff would be on the lines of the Harmonised System, it would bring about considerable alignment between the customs and central excise tariffs and thus facilitate charging of additional customs duty on imports equivalent to excise duty. Accordingly, it is proposed to specify the Central Excise Tariff suggested by the Study Group by a separate Tariff Act instead of the present system of the tariff being governed by the First Schedule to the Central Excises and Salt Act, 1944. 23. After referring to the Objects and Reasons, the Court laid down thus: It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to reduce disputes on account of tariff classification . Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central Excise Tariff in the Act and the tariff classification made therein, in case of any dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s put forth that whether the product Ujala Supreme which constitute dye and water, can be considered as a preparation based on synthetic organic colouring matter classifiable under Heading 3204.90, has been examined by the Central Excise Authorities who have been administering the classification based on HSN for the few decades. It has been brought to our notice that the Excise Department has raised a demand of central excise duty in respect of the goods of the appellant by proposing to classify the product as a preparation based on synthetic organic colouring matter and the said issue was decided by the Central Excise, Customs Gold (Control) Appellate Tribunal in Jyoti Laboratories v. CCE, Cochin 1994 (72) ELT 669, wherein it has been held that in the process of diluting AV dye with water, no new product classifiable under the Chapter Heading 3204.90 as preparation based on synthetic organic colouring matter emerges. The said decision rendered by the Tribunal, as contended by the assessee-appellant, has not been challenged by the Central Excise Department. We have also been apprised that the matter was again raised by the Department of Excise and travelled to the Tribunal in J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Acid Violet Dye. The observations of the HPTLC analysis are as follows: d. All the components present in diluted sample of AVP are also present in Ujala sample. e. No additional components are present in Ujala sample. f. The diluted AVP samples and the Ujala sample's spectral scans are super imposable and match exactly, which confirms that Ujala is a diluted form of AVP and chemically they both are identical. From the above analytical and technical data, it can be concluded that Ujala is only a diluted form of Acid Violet 49 with water, which has the inherent characteristics of brightening clothes and does not contain any other additives or optical brightening agents. The brightness of the fabric is increased because it absorbs all the colours in the visible light and transmits the bluish / purplish tint, thus hiding the yellowing of the fabrics. 29. Referring to the said report, it is submitted that when the 2003 Act has classified AVP under Entry 155(8)(d) and has classified it as equivalent to HSN Code No. 3204.12.94, it has to be put under that classification. As far as Ujala Stiff and Shine is concerned, it is the stand of the assessee that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3905 12 10 -- Poly (vinyl acetate) (PVA), moulding material 3905 12 20 -- Poly (vinyl acetate) resins 3905 12 90 --- Other 32. A comparison has been made between the said tariff and Entry 118(5) of List A of the Third Schedule of the 2003 Act which is as follows: Polymers of vinyl acetate or of other vinyl esters, in primary forms, other vinyl polymers in primary forms and gives the HSN code as 3905. 33. We have referred to the same as the learned counsel for the appellant has strenuously urged that HSN code has to be given necessitous acceptation as it is the intendment of the legislature. The Rules of Interpretation of the schedules have stipulated that the commodities which are given four digit HSN number shall include all those commodities under that Heading of the HSN which would mean that all the items listed under Chapter Heading 3905 of the Tariff are covered by the said Entry. It is contended that once it has been held by the CESTAT that there is no chemical change brought about in a process and if the product at the starting and the terminal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the brand name Ujala was classified differently by the assessee and the revenue. The Tribunal posed two relevant questions, namely, (i) whether there is a process of manufacture and a new excisable goods had arisen in the preparation of the product Ujala and (ii) if so, what is the correct classification? Thereafter, the Court referred to the opinion of the Chemical Examiner, wherein it has been stated thus: The entire method of manufacturing was also verified. The factory is getting the Acid Violet and Fluorescent Whitening agent from Bombay. The fluorescent whitening agent is nothing but Ranipal as per the packing list on the tin. Factory is making the Ujala by simply mixing these three items, Acid violet, ultra marine blue, fluorescent whitening agent in water heating them to a particular temperature and then filter this solution and bottling them in small packings and packing them in paper cartons for marketing, as such, there is no machinery is used for the production. All the process is done by manual labour only. Hence, in my opinion, no new product is emerged by this process, only three colouring matters mixed together in a particular proportion for colouring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here can be no shadow of doubt that the said entries fall under entry numbers 155(8)(d) and 118(5) of the list A of Third Schedule of the 2003 Act covering industrial inputs and packaging materials, but that would not be material and relevant regard being had to the rules of interpretation which are applicable. The subject matter of the list will not fall under residuary entry 103 in SRO 82/2006 dated 21.01.2006, if the goods in question fall in any entry of any of the schedule. That is what is conveyed by the language employed in Entry No. 103. The said Entry, as we find, does not stipulate or carves out any exception in respect of list A to the Third Schedule. That being the position, once goods fall under any of the HSN classification, that is, the goods/commodities that are included in list A to the Third Schedule, entry 103, which is residuary in nature, would not get attracted. 39. The submissions of learned counsel for the State that the decisions under the Excise Act would have no play, for they deal with the issue of the manufacture, does not commend acceptance. The High Court has elaborately dwelled upon the issue of manufacture. We have noticed the judgments ren ..... X X X X Extracts X X X X X X X X Extracts X X X X
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