2013 (7) TMI 917 - HC - VAT and Sales Tax

the articles nut, bolt and screws cannot be brought under SRO No. 82/06 and that it cannot fall under the Third Schedule to the KVAT Act. When consideration of evidence and hearing of parties are contemplated the exercise of such power should be coupled with expression of the reasons, dependent upon the facts and materials available.

Summary

Issues:
Classification of automobile spare parts under KVAT Act and interpretation of SRO No. 82/06.

Analysis:
The judgment involves appeals by automobile spare parts dealers challenging an order issued by the Commissioner of Commercial Taxes under the Kerala Value Added Tax Act, 2003. The order clarified the classification of "nut, bolt, and screws made of iron and steel, used as spare parts of motor vehicles" under HSN 8708, falling under entry 67(7) of SRO No. 82/06. The appellants contended that these items should fall under a specific entry of the Third Schedule to the KVAT Act, challenging the Commissioner's interpretation. They argued that the Commissioner overlooked the Rules of Interpretation of Schedules appended to the KVAT Act and the General Rules for Interpretation provided in the Customs Tariff Act, 1975. Reference was made to section 6(1) of the KVAT Act and a binding precedent to support their case.

The Government Pleader defended the Commissioner's decision, stating that it was in conformity with the KVAT Act and settled principles. He argued that the Commissioner's decision was based on materials and did not warrant interference. It was highlighted that goods not classifiable under the Rules of Interpretation should be classified under the heading "appropriate to the goods to which they are most akin."

The judgment delved into the provisions of section 6 of the KVAT Act, emphasizing that goods specified in the Second and Third Schedules are charged duty at specified rates, while goods not falling within those schedules are assessable under separate notifications. The Rules of Interpretation required adherence to the HSN code and judgments applicable to corresponding entries in the Tariff Act. The judgment noted that the Commissioner's consideration did not reflect adherence to the Third Schedule of the KVAT Act and the Rules of Interpretation, necessitating a fresh decision.

The judgment highlighted that under section 94 of the KVAT Act, the authority must decide after giving parties a reasonable opportunity to present their case and produce evidence. It was emphasized that the reasoning process behind the decision must be disclosed, which was lacking in the impugned order. As a result, the appeals were allowed, setting aside the order and requiring a fresh decision by the competent authority following the rule of notice and hearing as prescribed in section 94 of the KVAT Act.