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M/s. Assam Silicate, Glass & Chemical Works Versus The State of Assam, The Commissioner of Taxes, The Joint Commissioner of Taxes, The Superintendent of Taxes, M/s. Nilachal Chemical (P) Ltd.

2016 (3) TMI 838 - GAUHATI HIGH COURT

Determination of classification and rate of tax - Sodium Silicate declared not as a specified item under any of the entries of Part-'C' of IInd Schedule by Commissioner - Taxed as a residuary item @12.5% under Vth schedule of the VAT Act - Reasonable opportunity of hearing not provided to existing manufacturers - Held that:- the items that are listed as industrial inputs in Part-‘C’ of IInd Schedule of the VAT Act do not stand independently but refers to the corresponding entries in the C.E. Tar .....

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new manufacturer, who is exempted from tax to make the Ruling applicable to those who are not exempted from tax was not a correct approach. Therefore as the Commissioner gave the ruling at the instance of an exempted party without affording any hearing to the existing manufacturers who are impacted by the said decision, the Commissioner is directed to re-determine the classification and the rate of tax for Sodium Silicate, by providing a reasonable opportunity of hearing to the Association. - De .....

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standing counsel for the Finance (Taxation) Department, appearing for the respondent Nos.1-4. But none appears for the M/s. Nilachal Chemical (P) Ltd. (respondent No.5), who were impleaded on 7.1.2015. 2. The petitioner produces Sodium Silicate which is used as an ingredient in manufacture of soap, detergent, cement and other such products. They claim that Sodium Silicate should be subjected to tax @4% under the Assam Value Added Tax Act, 2003 (hereinafter referred to as the the VAT Act ), by tr .....

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e to be taxed @12.5%. 3. When the VAT Act was introduced w.e.f. 1st May, 2005, the Sodium Silicate manufacturers found that their product is not included amongst the numerous items of the industrial inputs category, specified in Part- C of IInd Schedule of the VAT Act. Therefore under the umbrella of the All Assam Sodium Silicate Manufacturer s Association, the representation was made on 6.6.2005 (Annexure-A), to the Commissioner of Taxes for inclusion of the product, to make it taxable at the l .....

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icate were mentioned and reference was also made that this product used mainly as an ingredient by the soap manufacturers, is charged to tax @4% in the neighbouring States of West Bengal and Bihar. Therefore the Commissioner was requested to clarify under which entry, the product Sodium Silicate is to be taxed, under the VAT Act. 4. But no decision on the representation filed by the manufacturer Association was given or conveyed and instead, on the application made by the new entrant into the fi .....

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. JC Gaur, the learned counsel submits that Sodium Silicate is an alkaline product manufactured from silica sand, soda ash and water and admittedly silica sand is the earth metal and soda ash is an alkaline product. Therefore it is argued that this item should have been included in Entry 35 of the schedule to the VAT Act, which fits in with Entry 28.05 of the C.E. Tariff Act, as it relates to alkaline and the earth metals. 6. Alternately the petitioner contends that the product Sodium Silicate c .....

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ct, Mr. Gaur argues that the Commissioner s decision on the application of M/s. Nilachal Chemical (P) Ltd. was an erroneous one, where there was no application of mind to the relevant parameters, for determination of taxability of Sodium Silicate. 8. Moreover since M/s. Nilachal Chemical (P) Ltd. (respondent No.5) was a new manufacturer, who were exempted from taxation, the petitioners contend that the determination of the taxability of the item at the instance of a party, which is not liable to .....

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ill confer unfair price advantage to the respondent No.5 vis-à-vis the existing manufacturer, of the same product. 10. The learned counsel refers to Section 105(2) of the VAT Act to contend that an advance ruling on the application of the manufacturer Association should have been given after affording a reasonable opportunity to the applicants and since no such opportunity was afforded to the existing manufacturers, the logic of the applicability of the advance ruling given on the applica .....

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of the learned lawyer for the Revenue is that the headings and entries for different items under the C.E. Tariff Act may not ipso facto be applied for determination of tax, under the VAT Act. 13. Mr. Saikia submits that when an advance ruling was given on the application of a manufacturer of Sodium Silicate after affording hearing to the concerned applicant M/s. Nilachal Chemical (P) Ltd. (respondent No.5) the said decision of the Commissioner will also be binding on the other manufacturers of .....

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order, as may be considered just and proper. 15. When we examine the order passed by the Commissioner of Taxes on the application of M/s. Nilachal Chemical (P) Ltd., we find that the order of 5.1.2006 was not passed after due consideration of the applicable parameters, to determine the rate of tax to be charged for Sodium Silicate. At best the Commissioner s order can be described as a ministerial order, where the authority after taking into account that the item is not covered by any of the li .....

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f mind, to the implication of the entries of the C.E. Tariff Act. 17. Moreover the item Sodium Silicate as is understood in common parlance (glass frit or compounds of rare earth metals) is also required to be considered in determination on the taxability of the product, as was represented by the manufacturer Association. Of course we are mindful of the fact that the Association s representation dated 6.6.2005 may not be construed as an application under Sub-Section (2) of Section 105 of the VAT .....

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