2012 (12) TMI 235 - HC - VAT and Sales Tax

Uttarakhand Value Added Tax Act - duplex coated board, mill board and grey board - whether the products manufactured by the respondent can be said to be articles of packing Held that - Boards are articles of packing - in commercial world and in common parlance, user of such boards is as articles of packing and, accordingly, would come within the inclusive meaning of articles of packing mentioned in entry No. 9 of Schedule II(B) of the Act

Summary

Issues: Interpretation of tax liability on sale of duplex coated board, mill board, and grey board under Uttarakhand Value Added Tax Act, 2005.

1. Interpretation of "articles of packing" under Schedule II(B) of the Act:
The case revolved around the interpretation of whether duplex coated board, mill board, and grey board can be considered as "articles of packing" under the Uttarakhand Value Added Tax Act, 2005. The Commissioner initially held that these products are not exclusively used as articles of packing since they serve other purposes as well. However, the Tribunal referred to judgments of the Allahabad High Court stating that these boards are indeed articles of packing. The Tribunal concluded that in commercial parlance, these boards are commonly used as articles of packing, falling within the inclusive definition provided in Schedule II(B) of the Act, which includes boxes, cartons, etc.

2. Liability to pay tax based on sale, not usage:
The Revenue contended that since duplex coated board, mill board, and grey board are not specifically listed in Schedule II(B) of the Act, their sale should attract a tax rate of 12 1/2 per cent. The argument was that if these boards are not sold exclusively for packing purposes but for other uses as well, they cannot be termed as articles of packing. However, the court clarified that the liability to pay tax arises at the point of sale, not based on the subsequent usage of the goods. The inclusive definition of "articles of packing" in the Act, which extends to materials used for making boxes, cases, and cartons, covers the boards in question as they can be used for such purposes, even if they have other uses.

3. Commercial perception and common parlance in determining classification:
The Tribunal's decision was based on the commercial perception and common parlance understanding of how these boards are used. By considering the judgments of the Allahabad High Court and the fact that the boards can be used for making boxes, cases, and cartons, the Tribunal concluded that in the commercial world, these boards are regarded as articles of packing. Therefore, the Tribunal held that the boards fall within the inclusive meaning of articles of packing mentioned in Schedule II(B) of the Act. The court upheld the Tribunal's decision, stating that there was no basis for interference as the conclusion was grounded on the commercial perception and common understanding of the usage of the boards.

In conclusion, the judgment clarified the tax liability on the sale of duplex coated board, mill board, and grey board under the Uttarakhand Value Added Tax Act, 2005, emphasizing the interpretation of "articles of packing" and the importance of commercial perception in determining the classification of goods for tax purposes.