2011 (11) TMI 604 - HC - VAT and Sales Tax

Summary

Issues involved: Challenge to order u/s 70 of Madhya Pradesh Value Added Tax Act regarding classification of "salt cake" for tax purposes.

Summary:
The petitioner, engaged in sale and purchase of grocery items, challenged an order by the Commissioner of Commercial Tax, Indore, regarding the classification of "salt cake" under the VAT Act. The petitioner claimed exemption based on "salt" entry but the CTO rejected it. The Commissioner classified "salt cake" under the residuary entry for tax at 13%, which the petitioner contested in the High Court.

The petitioner argued that the Commissioner did not consider other relevant entries where "salt cake" could be classified, such as industrial inputs and packing materials, and should not have resorted to the residuary entry directly. The Deputy Government Advocate supported the Commissioner's decision based on the common understanding and use of "salt cake."

The Court examined Section 70 of the VAT Act, which allows the Commissioner to determine tax rates on goods. It noted that the Commissioner solely relied on the "salt" entry and did not explore other possible classifications for "salt cake." Referring to a Supreme Court case, the Court emphasized that efforts should be made to align goods with specific entries before resorting to the residuary entry.

Consequently, the Court found the Commissioner's order inconsistent with Section 70 of the VAT Act and Supreme Court precedent. The order was quashed, and the matter was remitted to the Commissioner for reconsideration in line with the Court's observations. The petition was allowed without costs.