1998 (10) TMI 518 - HC - VAT and Sales Tax

Summary

Issues: Classification of cement bonded particle board under sales tax act

Analysis:
The judgment delivered by the High Court of Andhra Pradesh pertained to the classification of cement bonded particle board under the sales tax act. The main question was whether the cement bonded particle board should be categorized under entry 114 of the First Schedule to the Andhra Pradesh General Sales Tax Act or as an unclassified item. The assessee argued that it should be classified as an unclassified item under the Seventh Schedule, while the Revenue contended that it falls under entry 114 of the First Schedule.

The learned counsel for the appellant argued that since the cement bonded particle board is predominantly made up of cement (62%) with only 28% wood used for bonding purposes, it should not be classified under entry 114, which primarily deals with articles predominantly made of wood. On the other hand, the Revenue's counsel argued that as long as an article is made up of wood along with another material, it automatically falls under entry 114. The common parlance test was also brought into consideration, suggesting that the perception of the common man and traders regarding the product being made of wood is crucial in classification.

Upon analyzing the relevant entry 114 of the First Schedule, the Court observed that the predominant content of the articles classified under this entry should be wood, with the presence of some other material being optional. In this case, since the cement bonded particle board consisted of 62% cement and 28% wood, the test of predominance was deemed applicable. The Court concluded that the cement bonded particle board did not fall under entry 114 as its composition was predominantly cement, not wood.

The Court disagreed with the Tribunal's reasoning that the cement was used for strength and durability, stating that the presence of wood was minimal, and the use of the product as doors and partitions was irrelevant in determining its classification. Consequently, the tax revision cases were allowed, and the Tribunal's order was set aside, ruling in favor of the assessee.

In conclusion, the High Court's judgment clarified the classification of cement bonded particle board under the sales tax act, emphasizing the importance of the predominant composition of the product in determining its categorization under the relevant schedule entries.