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2009 (4) TMI 885 - HC - VAT and Sales TaxUjala Supreme and Ujala Stiff and Shine - Whether both the items fall under residuary entry 103 of S.R.O. No. 82 of 2006 which provides for rate of tax on items not covered by any of the entries in the list provided in the notification or by any entry of any of the Schedules to the Act? Held that - Even though classification of items under VAT regime is also based on HSN numbers, the same does not mean that the products made out of items with HSN numbers should be classified as the original items with same HSN number. When the products made from industrial raw material are commercially different with distinct use and purpose, it cannot be treated as the raw material from which it is made. Our findings above rendered with regard to Ujala Supreme squarely apply to Ujala Stiff and Shine also. We are therefore of the view that the Commissioner of Commercial Taxes is perfectly justified in classifying the two items under residuary entry 103 of S.R.O. No. 82 of 2006. Appeal dismissed.
Issues Involved:
1. Classification of "Ujala Supreme" under the Kerala Value Added Tax Act, 2003. 2. Classification of "Ujala Stiff and Shine" under the Kerala Value Added Tax Act, 2003. Detailed Analysis: 1. Classification of "Ujala Supreme": The appellant contended that "Ujala Supreme," a fabric whitener, should fall under entry 155(8)(d) of the Third Schedule to the Kerala Value Added Tax Act, 2003, which provides for "acid violets" with HSN Code No. 3204.12.94. The appellant argued that "Ujala Supreme" is made by diluting acid violet paste with water. Test reports showed that "Ujala Supreme" contains less than one percent acid violet paste and 99.01 percent water. The court examined whether "Ujala Supreme" could be categorized as "acid violet." The court found that "acid violet" is an industrial input used for dyeing silk and wool at elevated temperatures in the presence of acid. However, "Ujala Supreme" cannot be used as a dye or coloring matter because it has lost its property as a dyeing agent due to extreme dilution. The court cited the Supreme Court's observation that a commodity can only be considered a new and distinct commodity if it undergoes a series of changes that alter its original character and identity. The court concluded that "Ujala Supreme" is no longer "acid violet" because it has lost its identity and properties as an industrial input. The court upheld the Commissioner's decision that "Ujala Supreme" does not fall under entry 155(8)(d) of the Third Schedule. Instead, it falls under residuary entry 103 of S.R.O. No. 82 of 2006, which covers items not specified in the Second or Third Schedule. The court agreed with the Commissioner that "Ujala Supreme" is a fabric whitener and should be classified under entry 103. 2. Classification of "Ujala Stiff and Shine": The appellant argued that "Ujala Stiff and Shine," a liquid fabric stiffener, should fall under entry 118(5) of List A of the Third Schedule, which covers "polymers of vinyl acetate or of other vinyl esters, in primary forms; other vinyl polymers in primary forms." Test reports indicated that "Ujala Stiff and Shine" contains 42.98 percent polymerized vinyl acetate, 55.80 percent water, and has a rose fragrance. The court found that "Ujala Stiff and Shine" is a laundry item used to impart crispness and shine to clothes, similar to starch. The court noted that the product is different from the raw material, polymerized vinyl acetate, and has a distinct use and purpose. The court rejected the appellant's argument that the product should retain its original classification based on the raw material's HSN Code. The court upheld the Commissioner's decision that "Ujala Stiff and Shine" does not fall under entry 118(5) of the Third Schedule. Instead, it falls under residuary entry 103 of S.R.O. No. 82 of 2006, which covers items not specified in the Second or Third Schedule. The court agreed with the Commissioner that "Ujala Stiff and Shine" is a distinct product from its raw material and should be classified under entry 103. Conclusion: The appeal was dismissed, and the court upheld the Commissioner's classification of both "Ujala Supreme" and "Ujala Stiff and Shine" under residuary entry 103 of S.R.O. No. 82 of 2006, taxable at the rate of 12.5 percent.
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