2008 (8) TMI 768 - HC - VAT and Sales Tax

Petroleum jelly - Chemicals - Merely because concessional rate is provided for petroleum jelly along with chemicals, it cannot be treated as a chemical

Summary

Issues:
1. Classification of petroleum jelly for taxation under the KGST Act.

Analysis:
The primary issue in this case revolves around the classification of petroleum jelly for taxation purposes under the Kerala General Sales Tax (KGST) Act. The question raised is whether petroleum jelly should be considered a petroleum product under Entry 108(vi) or a chemical under Entry 33 of the First Schedule to the KGST Act. The petitioner argues that petroleum jelly falls under Entry 33 as a chemical and not under Entry 108 covering petroleum products.

Upon examination, it is observed that petroleum jelly is not explicitly listed under Entry 33 which pertains to chemicals, including various substances like caustic soda, sodium sulphate, and chemical mixtures. On the contrary, Entry 108 of the First Schedule encompasses taxation on petroleum products, including a residual category for products not specified elsewhere in the schedule. The court notes that petroleum jelly, derived from crude oil, is distinct from natural gas and is considered a petroleum product.

The contention put forth by the petitioner is based on a notification that grants a concessional tax rate on chemicals, including petroleum jelly. However, the Tribunal's decision emphasizes that the concessional rate does not categorize petroleum jelly as a chemical but rather includes it due to specific notification provisions. The court concurs with the Tribunal's reasoning that the concessional rate does not alter the classification of petroleum jelly as a petroleum product.

Furthermore, the court acknowledges the government's authority to grant exemptions or concessional rates on goods as deemed appropriate. In this instance, the concessional rate for petroleum jelly, alongside rubber chemicals, does not reclassify it as a chemical but rather reflects its utilization in the rubber industry. Despite the concessional rate, petroleum jelly remains classified as a petroleum product under the residual entry of Entry 108(vi) of the First Schedule to the KGST Act.

In conclusion, the court dismisses the revision filed by the assessee, affirming that petroleum jelly is indeed a petroleum product falling within the ambit of Entry 108(vi) of the First Schedule to the KGST Act. The judgment underscores the specific classification of petroleum jelly as a petroleum product despite the concessional tax treatment it receives alongside chemicals, emphasizing the legal interpretation of relevant entries in the tax schedule.