2006 (3) TMI 691 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of LDPE transparent film for tax purposes under entry 91 or entry 101 of the First Schedule to the Kerala General Sales Tax Act, 1963.

Analysis:
The judgment of the Kerala High Court, delivered by Justice K.S. Radhakrishnan, addressed the issue of whether LDPE transparent film should be classified under entry 91 or entry 101 of the First Schedule for tax purposes. The case involved an assessee who was a dealer in pesticides, rubber, and chemicals, and the assessment year in question was 1995-96. The Assistant Commissioner had levied tax at 10% on the sale of LDPE transparent film, denying the reduced rate of tax under S.R.O. No. 1541 of 1993. The question before the Appellate Tribunal was whether the LDPE transparent film used for packing should be considered a material used for packing falling under entry 91 or as a plastic product falling under entry 101.

The court examined the definitions of entry 91 and entry 101 of the First Schedule. Entry 91 pertains to packing cases and materials, while entry 101 relates to plastics and plastic articles. The court noted that LDPE is commonly recognized as a packing material in industrial and commercial sectors. Since LDPE is manufactured specifically as a packing material and not as a plastic product, it should be classified under entry 91 as a packing material, attracting a lower tax rate of 5%, rather than under entry 101 as a plastic product taxed at 10%.

The court emphasized that entry 91 includes all packing materials, and LDPE transparent film, being a packing material, falls within this category. The expression "including" in entry 91 is interpreted to encompass all packing materials. Therefore, the court upheld the Tribunal's decision that LDPE transparent film should be taxed at 5% under entry 91, dismissing the revision for lacking merits. This judgment clarifies the classification of LDPE transparent film for tax purposes under the relevant entries of the Kerala General Sales Tax Act, providing clarity on the applicable tax rate based on its intended use as a packing material.