2005 (3) TMI 724 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax rate for Parachute coconut oil under different entries in Bihar Act notifications.

Analysis:
The petitioner, a registered company selling consumer products including Parachute coconut oil, challenged the assessment order charging sales tax at 12% instead of 9% under different entries. The State Government's notifications prescribed varying tax rates for commodities, including coconut oil. The key issue was whether Parachute coconut oil falls under entry No. 63 (9% tax) or entry No. 245 (12% tax) of the notifications.

The Tribunal classified Parachute coconut oil as hair oil under entry No. 245 based on factors like non-inclusion in edible oil orders and advertisements promoting it as hair oil. However, the petitioner argued that coconut oil, if dual-purpose, should be taxed based on specific entry (No. 63) rather than a general one (No. 245). The State contended that consumer use determines classification, citing the Evidence Act's judicial notice provision.

Legal principles dictate interpreting taxing statutes strictly, favoring the subject in case of ambiguity. The burden of proof lies with the Revenue to classify items for taxation based on common trade understanding and customer use. The petitioner cited cases where similar products were taxed favorably due to specific entry inclusion. The Tribunal's reliance on irrelevant grounds like non-inclusion in trade orders and advertisements was deemed incorrect.

The Court emphasized that when an item serves dual purposes, proper classification based on consumer use is crucial. Judicial notice may not suffice in such cases, requiring concrete evidence from the Revenue. Ultimately, the Tribunal's decision was quashed, and the matter was remitted for fresh consideration in line with legal principles discussed, leading to the allowance of the writ applications.

In a concurring opinion, the Judge agreed with the decision to allow the writ applications, highlighting the importance of accurate classification for taxation purposes under the Bihar Act.