2010 (7) TMI 883 - HC - VAT and Sales Tax

Whether 10 gram gold rectangular bars marketed by that bank and classifiable under HSN Code 7108.13.00 falls under entry 4(4) of the Third Schedule to the Act and is taxable at four per cent? Held that - We are of the view that the impugned clarification by the Commissioner under section 94 clarifying that 10 gm. gold rectangular bar marketed by SBI falls under HSN Code 7108 13 00 applies to the appellant s case also in respect of gold coins of similar size, i.e., 5 gm., 8 gm., 10 gm., etc., marketed by them. Appeal dismissed.

Issues Involved:
1. Classification of "10 gram gold rectangular bars" under the Kerala Value Added Tax Act, 2003.
2. Applicability of HSN Codes 7108.12.00 and 7108.13.00.
3. Interpretation of the Schedules in the Act.
4. Prospective effect of the Commissioner's clarification.

Issue-wise Detailed Analysis:

1. Classification of "10 gram gold rectangular bars" under the Kerala Value Added Tax Act, 2003:
The appellant, a private sector bank, challenged the clarification issued by the Commissioner of Commercial Taxes, which classified "10 gram gold rectangular bars" marketed by another bank under HSN Code 7108.13.00, making them taxable at four per cent under entry 4(4) of the Third Schedule to the Act. The appellant contended that the item should be classified under HSN 7108.12.00, falling under entry 1(2) of the Second Schedule, attracting a tax rate of one per cent as "bullion."

2. Applicability of HSN Codes 7108.12.00 and 7108.13.00:
The court examined the Rules of interpretation of the Schedules in the Act, which align with the Customs Tariff Act, 1975 and the Harmonised System of Nomenclature (HSN). The disputed HSN Codes were 7108.12.00 ("Gold in other unwrought forms") and 7108.13.00 ("Gold in other semi-manufactured forms"). The court referred to the Customs Tariff Act and the website "GOLD BARS WORLDWIDE" for definitions and descriptions. The court concluded that smaller minted gold bars, such as the 10 gm. rectangular bars, are not "unwrought" but "semi-manufactured" forms, thus falling under HSN Code 7108.13.00.

3. Interpretation of the Schedules in the Act:
The court emphasized that products with an 8-digit HSN Code should be interpreted as described in the Customs Tariff Act. It noted that minted gold bars undergo a manufacturing process that transforms unwrought gold into polished, minted products, which are not used as raw materials for manufacturing gold ornaments but are instead bought for their finish and beauty. Therefore, the court held that the 10 gm. rectangular gold bars marketed by the appellant should be classified under HSN Code 7108.13.00.

4. Prospective effect of the Commissioner's clarification:
The appellant argued that the clarification should apply prospectively, referencing the Supreme Court decision in Reckitt Benckiser (India) Ltd. v. Commissioner, Commercial Taxes. However, the court noted that the proviso to section 94, which allowed for prospective effect, was deleted by the Finance Act, 2008, effective April 1, 2008. The court did not address the prospective application issue in this appeal, as it was not directly related to the clarification issued in response to another dealer's application. The court dismissed the appeal, affirming the Commissioner's clarification.

Conclusion:
The court dismissed the appeal, affirming that the 10 gm. rectangular gold bars should be classified under HSN Code 7108.13.00 and taxed at four per cent under entry 4(4) of the Third Schedule to the Kerala Value Added Tax Act, 2003. The court did not address the issue of the prospective effect of the clarification, as it was not pertinent to the appeal.

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