2014 (4) TMI 294 - HC - VAT and Sales Tax

Rate of tax - Classification of Industrial cables - Did the Tribunal fall into an error in interpreting Entry 40 Schedule-III of the Delhi VAT Act, 2004 in holding that the HSN/CET nomenclature in the circulars issued on 16.09.2005, 17.02.2006 and 20.03.2006 would prevail Held that - It was noticed that the express terms of the statute clearly referred to industrial cables including other categories of industrial cables such as Industrial Cables/High Voltage Cables, XLPE, Jelly filled Cables, Optical Fibres - The circulars in fact add to and also substitute from the main heading industrial cables - This is because the Entry nowhere refers to any heading of the CET - Having not done so, the department appears to even cut down the amplitude of the description industrial cables by excluding non-industrial cables or wires of a certain width in the last circular No.51 of 2005-06. Relying upon Commissioner of Sales Tax v. Dev Enterprises Ltd. 2011 (6) TMI 657 - BOMBAY HIGH COURT which referred Green Flashlight Industries Ltd. v. Union of India 1984 (8) TMI 85 - SUPREME COURT OF INDIA and O.K. Play (India) Limited v. Commissioner of Central Excise 2005 (2) TMI 114 - SUPREME COURT OF INDIA held that where the statute expressly refers or alludes to other instruments or documents such as CET/HSN classifications, then alone would those classifications have to be looked into for the purposes of interpretation - In the absence of such express reference in the parent statute the reference through a circular, cannot guide the plain and commercial parlance meaning of the expression attributed to the article or goods in question. When there is clear guidance by the statute i.e. the DVAT Act as to in respect of which articles or goods the HSN and CET would have to be referred as part of the statute, it is not logical to import, for the purpose of interpretation, HSN/CET references to articles of goods which do not contain any such references - Here the common parlance test is applicable - The Indian Electricity Act and the Electricity Supply Act as well as the Rules and Regulations under these enactments would guide and regulate the technical aspects which traders and those dealing with these articles understand - When the statutory determination itself having classified 1100 volts cables as high voltage cables, No difficulty in accepting that the subject goods are industrial cables and are classifiable under Entry No.40 of the Schedule-III The appeal, therefore, is allowed - Decided in favour of assessee.

Summary

Issues:
Interpretation of Entry 40 Schedule-III of the Delhi Value Added Tax Act, 2004 regarding classification of industrial cables.

Analysis:
The case involved a dispute over the classification of industrial cables under Entry 40 of Schedule-III of the Delhi Value Added Tax Act, 2004. The question at hand was whether the HSN/CET nomenclature indicated in certain circulars issued by tax authorities would prevail in classifying the article in question. The Commissioner had determined that industrial cables fell under a higher rate of duty based on specific references to HSN/CET entries in circulars, contrary to the dealer's contention that common parlance should apply unless the statute expressly referred to CET or HSN headings. The Tribunal's decision was divided, with the majority upholding the Commissioner's determination guided by the circulars, while the minority opinion favored the dealer's argument.

The majority opinion upheld the Commissioner's determination, stating that the circulars provided a general, uniform, and non-discriminatory interpretation. The Revenue argued that the circulars clarified what was meant by "industrial cables" and excluded non-industrial cables or wires, placing the goods in question under a residuary entry rather than Entry No.40. However, the dealer's counsel emphasized that Entry No.40 expressly mentioned "industrial cables," and the circulars could not prevail over this explicit description. The dealer also relied on a judgment of the Bombay High Court supporting their position.

The Court analyzed the statutory provisions and previous judgments, noting that references to HSN or CET in the statute had to be followed for interpretation. It was emphasized that in the absence of such explicit references, the common parlance test should be applied. The Court further examined definitions of cables and voltage under relevant regulations to support the dealer's classification of industrial cables under Entry No.40. Ultimately, the Court sided with the dealer, concluding that the subject goods were industrial cables classifiable under Entry No.40, thus allowing the appeal in favor of the assessee.