TMI Blog2017 (7) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry can only be made if a product does not squarely fall within any of the specified Entries, and a good deal of caution is required to be undertaken in the matter of classification, identification of an Entry and a description thereof would be relevant for assigning it to a particular Tariff Entry, and lodgment of an item in Residuary Category is approvable only if by no conceivable reasoning which can be brought within the purview of any other tariff item, and the burden always lie on the Revenue, if it intends to carry it to the Residuary Schedule. Penalty u/s 61 - Held that: - no case of penalty is made out. Merely because an addition was made by the AO, is no reason for initiating penalty proceedings or even levying penalty. Admittedly, it is a case where the assessee claimed a lower rate and claiming to be falling in a specific Entry and Revenue intended to carry it to Residuary Entry, that does not mean that a case of concealment has been made out by the Revenue - the Apex Court in the case of Sree Krishna Electricals v. State of Tamil Nadu & Another [2009 (4) TMI 428 - SUPREME COURT OF INDIA], has held that in a case of classification of Entries, two views being possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from dilution of AVP no other process is undertaken to produce Ujala Supreme , and it is also claimed on behalf of the respondent that Ujala Supreme does not contain any other ingredient other than AVP and Water. The claim of assessee has been that the said product Ujala Supreme is classifiable under Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Rajasthan Value Added Tax Act, 2003 (in short the Act of 2003 ) and VAT is accordingly payable @ 4% or 5%, as the case may be. However, the Assessing Officer was not satisfied with the claim of respondent assessee and it was, prima facie, opinion of the AO that since the said product is not covered by any of the specified Entries of Schedule-IV, and once the product does not fall in any specific Entry, it will fall in the Residuary Schedule-V, and VAT would be leviable @ 12.5% / 14%, as the case may be. 6. On behalf of the respondent, a detailed reply has been filed claiming, inter alia, that Ujala Supreme is nothing but a diluted AVP, which retains the character and use of AVP and the product is 99% water and 1% Acid Violet and one has to put only 3-4 drops of Ujala Supreme in one litre water to wash clothes. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue vehemently contended that the specified product Ujala Supreme is a laundry whitener / fabric whitener and does not fall within any specific Entry as claimed by the assessee. Learned counsel further contended that neither in Entry 119 nor in 121 of Part-B of Schedule-IV, nor in Entry 69 of Schedule-IV, the product can be classified and once the product does not fall in a specified Entry, then the AO was well justified in holding the product liable to higher rate of tax and falling in Schedule-V only. Learned counsel further contends that the product of assessee is a finished product, meant for specific purpose i.e. for brightening of the clothes and is marketed as such, and also placed on record the ingredients available in Ujala Supreme from website of the respondent. It is further claimed that these are merely consumer products and not an industrial product and the product is being sold in small packages, in small quantities of 30 ml, 75 ml, 125 ml and 250 ml and is being purchased by the consumers according to their choice. Had it been an industrial product, it would have been sold in bulk quantity and not in small packages. 12. Learned counsel further contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically falls in Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Act of 2003, and both the Appellate Authorities, after concurrent finding, have upheld the claim of respondent assessee by detailed reasoning, which is not required to be interfered with. Learned counsel further contends that the AO placed reliance on the judgment of Kerala High Court in the case of M/s M.P. Agencies v. State of Kerala (supra), which was holding field at the time when the assessment was passed, but the said judgment of Kerala High Court was reversed by the Hon ble Apex Court in the case of M.P. Agencies v. State of Kerala (supra), and once the Apex Court has reversed the finding reached by Kerala High Court, then placing reliance by the learned counsel for Revenue and by the AO goes out of picture. Learned counsel drew attention of this court by showing from the observation of the Apex Court in the case of M.P. Agencies (supra) that the claim of assessee has rightly been taken care of by both the Appellate Authorities. Learned counsel further contends that the Apex Court has held that the product Ujala Supreme is nothing but diluted form of AVP and the fact that AVP has been diluted to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of industrial inputs 121 Master Batches other colouring matter including ultra marine 4/5 IV 69 Industrial inputs as specified in Part-B of this Schedule 4/5 19. The salient features of the product has earlier been highlighted. Both the Appellate Authorities have given a finding that the said product Ujala Supreme is classifiable under Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Act of 2003. From the facts noticed hereinbefore and analysed earlier, the Entry starts with Synthetic Organic Colouring Matter and, therefore, any preparation based on Synthetic Organic Colouring Matter , should in my opinion, will also fall in the said Sub-Entry 119 referred to hereinbefore. 20. It is brought on record by learned counsel for the respondent assessee that Ujala Supreme is made after dilution of AVP, (a Synthetic Organic Colouring Matter ), and apart from AVP, the only ingredient is Water. There is no counter by AO to this fact observed by both the Appellate Authorities, except mere version of the AO th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow: (1) The Chemical composition of AVP and Ujala are the same except for the dilution in Ujala''. (2) It can be observed from the chromatogram that Ujala is a heavily diluted form of AVP with water. (3) As such Ujala cannot be used as a dye or a colouring matter as it is. (4) From the technical literature it can be understood that diluted acid violet 49 is used in the fabric finishing industries for imparting brightness to white fabrics. (The mechanism being the fabric absorbs all the colours in the visible light and transmits the bluish/purplish tint) As per technical report and the HPTLC report, it can be conclusively said that Ujala is nothing but a diluted form 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That apart we find from the test reports that there is only dilution in water and needless to emphasize the same does amount to or result in manufacture and hence, no new product emerges. Therefore the common parlance would come into play. 40. From the aforesaid discussion, it is clear as crystal that two goods/products have been held to be covered under the HSN Code 3905, and HSN Code 3204.12.94 and hence, there 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/commoditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ujala Supreme . In the aforesaid case even the court found that the product comprised of :- AV/49 - .98% Water - 99.02% 26. It would be proper to quote para 37 of the judgment :- 37. On a totality of the above considerations, this Court is of the unhesitant view that the petitioner s product Ujala Supreme is entitled to be included in Entry 114 of Schedule II-C of the Act with corresponding rate of duty prescribed by HSN Code No.3204.12.94. This Court, for the reasons recorded hereinabove, is thus in respectful disagreement with the observatiosn and the conclusions recorded in M/s M.P. Agencies (supra). The impugned order dated 11.8.2020 when judged by the above touchstone is thus unsustainable in law and on facts. It is thus, quashed. 27. In the above judgment, the Gauhati High Court distinguished the judgment of Kerala High Court and came to independent reasoning. 28. The said judgment of the learned Single Judge of Gauhati High Court was challenged by the State of Assam before Division Bench of the Gauhati High Court, which affirmed the judgment of the learned Single Judge vide judgment dt 3.9.2012 in State of Assam v. Jyothy Laboratories Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh learned counsel for the assessee relied on a Circular / Notification of this court supra, that even the Rajasthan Value Added Tax has accepted that insofar as the Rules for interpretation of the provisions of Central Excise Tariff Act, 1985 read with explanatory notes as amended from time to time shall apply to these proceedings also and which was made effective by Notification dt 24.5.2010, to which learned counsel for the Revenue argued that at-least upto 24.5.2010 the said Notification was not in existence, therefore, at-least to the period prior to 24.5.2010 the said Notification being not applicable and prior to 25.5.2010 the rate applied by the AO should be upheld, but in my view it will not make any difference insofar as the said fact is concerned, particularly when the Apex Court on the same product as referred to hereinbefore in the case of M.P. Agencies v. State of Kerala (supra) has held the said product is specific and liable to a lower rate. 32. Taking into consideration aforesaid, the first question is answered against the Revenue and in favour of assesseerespondent. 33. Learned counsel for the Revenue also submitted that penalty u/s 61 is leviable and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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