2015 (9) TMI 1456 - HC - VAT and Sales Tax

Rate of tax on manufacturing and sale of Linear Low Density Polythene Bags (L.L.D.P.E) - The case of the opposite party is that they are manufacturers of LLDPE bags. According to them H.D.P.E. and LLDPE bags are the same. They are used as packing materials. It is the further case of the opposite party that during the relevant year such commodity being under entry No.129 of the Schedule of the Sales Tax Act is not assessable @ 8% on sales under Entry No.136 but at the rate of 4% on sales. Held that - the impugned order suffers from inadequacy and having failed to exercise the jurisdiction vested on them are liable to be modified. We therefore of the view that the commodity of the opposite party being assessable at the rate of 4% of sales tax under Entry No.129 of the Act we hereby direct learned Assessing Authority to assess the tax liability after considering the commodity of the opposite party under entry No.129 exigible at the rate of 4% of sales tax. - Decided in favor of assessee.

Summary

Issues Involved:
1. Classification of Linear Low Density Polyethylene (L.L.D.P.E.) bags for tax purposes.
2. Correct tax rate applicable to L.L.D.P.E. bags under the Orissa Sales Tax Act.
3. Authority of the Second Appellate Tribunal to direct de novo assessment.

Issue-wise Detailed Analysis:

1. Classification of Linear Low Density Polyethylene (L.L.D.P.E.) Bags for Tax Purposes:
The primary issue revolves around whether L.L.D.P.E. bags should be classified under Entry No.129 or Entry No.136 of the Orissa Sales Tax Act. The petitioner argued that L.L.D.P.E. bags, being a type of polythene, should fall under Entry No.136, which includes various plastic goods and is taxable at 8%. Conversely, the opposite party contended that L.L.D.P.E. bags are similar to H.D.P.E. bags listed under Entry No.129, which is taxable at 4%.

2. Correct Tax Rate Applicable to L.L.D.P.E. Bags:
The Assessing Authority initially assessed L.L.D.P.E. bags at 8% under Entry No.136, which includes polythene and other plastic goods. However, the Tribunal noted that neither the Assessing Authority nor the First Appellate Authority provided adequate reasoning for this classification. The Tribunal remanded the case for fresh assessment, suggesting the need for expert opinion to correctly identify the commodity. The High Court observed that L.L.D.P.E. bags are not explicitly mentioned in either entry but noted the similarities with H.D.P.E. bags listed under Entry No.129. The Court emphasized that in cases of doubt, the interpretation should favor the taxpayer, thereby concluding that L.L.D.P.E. bags should be taxed at 4% under Entry No.129.

3. Authority of the Second Appellate Tribunal to Direct De Novo Assessment:
The petitioner challenged the Tribunal's authority to remand the case for a de novo assessment. The High Court criticized the Tribunal for not applying judicial mind and failing to provide a definitive ruling. It held that the Tribunal should have resolved the issue based on the available evidence rather than remanding it for further assessment. The Court concluded that the Tribunal's decision to remand was unnecessary and that the matter should have been decided conclusively at the appellate level.

Conclusion:
The High Court concluded that L.L.D.P.E. bags should be classified under Entry No.129 and taxed at 4%. It directed the Assessing Authority to reassess the tax liability accordingly, thereby setting aside the decisions of the lower authorities and the Tribunal's remand order. The revision petition was disposed of with these directions.