2006 (10) TMI 397 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of tax rate for super glue under Kerala Value Added Tax Act, 2003
- Classification of super glue under specific schedule of the Act
- Impact of notification on tax rate applicability

Interpretation of Tax Rate for Super Glue:
The appellant imported and distributed Sticko brand super glue, initially collecting tax at 12.5%. However, after obtaining a certificate stating the glue's classification under HSN Code 2916.19.50, the appellant claimed the tax rate should not exceed four percent under item 164(10) of the Third Schedule. The Sales Tax Officer rejected this claim, leading to a writ petition and subsequent direction for the Commissioner to decide on the tax rate. The Commissioner upheld the 12.5% tax rate under a specific serial number, failing to address the applicability of item 164(10) to the super glue.

Classification of Super Glue:
The appellant argued that the super glue fell under item 164(10) of the Third Schedule, supported by a certificate from Cochin University of Science and Technology. However, the Government Pleader contended that the glue did not qualify under this item and was correctly taxed at 12.5% even before a gazette notification altering the tax rate. The court analyzed the nature of the product, determining it as a glue for joining items and not falling under industrial inputs or packing materials specified in List A of the Third Schedule. Consequently, the court accepted the State's position that the super glue was taxable at 12.5%.

Impact of Notification on Tax Rate Applicability:
The court highlighted that the substituted clause regarding tax rate did not benefit the appellant, as the product did not fall under specific clauses warranting a lower tax rate. The issuance of a notification did not alter the tax rate applicability for the appellant, who had been correctly collecting tax at 12.5% for the super glue product. The court emphasized that the classification of goods for taxation purposes should prevail over expert opinions or etymological meanings.

In conclusion, the court dismissed the appeal, affirming that the super glue imported and marketed by the appellant was taxable at 12.5% under a specific serial number, rejecting the appellant's claim for a lower tax rate based on a different item classification. The court's decision was based on the classification of goods for taxation and the specific provisions of the Kerala Value Added Tax Act, 2003.