2009 (1) TMI 799 - HC - VAT and Sales Tax

Whether the order of the Tribunal holding the said goods are not declared goods falling under item (iv), sub-item (xv) of section 14 of the 1956 Act and thereby attracts residuary entry assessable at the rate of twelve per cent is sustainable in law? Held that - Force in the argument made by Mr. Bajoria that a sub-item cannot be construed with the aid of another sub-item and accordingly, that cannot be the proper way of understanding as rightly contended by Mr. Bajoria. Therefore, in the instant case, in sub-items, we have to look into the main item and if we do so, then there is no difficulty in holding that stainless steel wire and stainless steel wire resistance are declared goods. Therefore, the Tribunal has wrongly held that the stainless steel wire and stainless steel wire resistance cannot be treated as a declared goods under section 14(iv)(xv) of the Central Sales Tax Act, 1956. Application allowed.

Issues Involved:
1. Classification of "resistance stainless steel wire" under the Central Sales Tax Act, 1956.
2. Applicability of tax rate: Whether the goods fall under the declared goods category attracting 4% tax or under the residuary entry attracting 12% tax.
3. Burden of proof on the Revenue for classification of goods.
4. Consistency in classification by tax authorities across different cases.
5. Interpretation of "iron and steel" under section 14 of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Classification of "resistance stainless steel wire" under the Central Sales Tax Act, 1956:
The main issue was whether the "resistance stainless steel wire" falls under item (iv), sub-item (xv) of section 14 of the Central Sales Tax Act, 1956, which lists declared goods. The Tribunal had held that the goods did not qualify as declared goods, leading to a higher tax rate under the residuary entry.

2. Applicability of tax rate:
The petitioners argued that the goods should be taxed at 4% as declared goods under serial No. 1 of Schedule VII to the 1994 Act, rather than 12% under the residuary item 10 of Schedule IX. They contended that "resistance stainless steel wire" should be classified under "wire rods and wires-rolled, drawn, galvanized, aluminized, tinned or coated such as by copper" as mentioned in section 14(iv)(xv) of the 1956 Act.

3. Burden of proof on the Revenue for classification of goods:
The petitioners emphasized that the burden of proof lies on the Revenue to establish that the goods fall under a different category than claimed by the assessee. They cited several Supreme Court decisions, including Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay, which held that the onus of proof is on the Revenue to classify goods under a specific tariff entry.

4. Consistency in classification by tax authorities across different cases:
The petitioners pointed out that in a similar case involving a sister concern, the Deputy Commissioner had held the goods as declared goods, attracting a 4% tax rate. They argued that there was no reason to deviate from this classification in their case.

5. Interpretation of "iron and steel" under section 14 of the Central Sales Tax Act, 1956:
The court referred to the definition of "iron and steel" in section 14(iv), which includes various forms of steel, including wire rods and wires. The court analyzed the technical definitions and standards, concluding that "resistance stainless steel wire" should be classified as declared goods under item (iv)(xv).

Judgment:
The court found that the Tribunal had erred in its classification of the goods. It held that the "resistance stainless steel wire" falls under the category of declared goods as per section 14(iv)(xv) of the 1956 Act. The court emphasized that the onus was on the Revenue to prove otherwise, which it had failed to do. Consequently, the court set aside the Tribunal's order and ruled that the goods should be taxed at the rate of 4% as declared goods.

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