2015 (2) TMI 969 - HC - VAT and Sales Tax

Classification of Pressure cooker under Assam Value Added Tax Act, 2003 - Aluminium utensil- covered in Second schedule or Not an Aluminium utensil- covered under residual fifth schedule - Penalty due to consequential assessment - Held that - The reasoning given by the Commissioner is a plausible one and appeals to the Court. This position has been further explained in the affidavit filed by the Commissioner. It is stated that pressure cookers have valves made of steel, rubber gasket and also have rubber insulating materials. Pressure cooker is not made solely of aluminium so as to qualify for inclusion in Entry No. 6 of Part-A General of the Second Schedule. In common parlance, pressure cookers are not understood as mere utensils, but contrived appliances meant for domestic use. To fall within the sweep of Entry No. 6, the item must not only be a utensil, but must be aluminium or enamelled utensil. The affidavit has stated that in other States where tax on pressure cooker is levied at the rate of 4%, the description in the entry is utensils of all kinds including pressure cookers except made of precious metals We agree with the stand taken by the Commissioner of Taxes in the aforesaid affidavit. Whether pressure cooker falls within the sweep of Entry No.6 of Part-A General of Second Schedule or not will have to be determined keeping in mind the legislative intent expressed through the words in the entry. When the description of the entry is aluminium utensils and enamelled utensils, the legislative intent is quite clear that to come within the sweep of Entry No.6, the good in question has to be an aluminium utensil and enamelled utensil. Had the Legislature intended to give the benefit of the entry to goods, such as pressure cooker, it would have been clearly mentioned in the entry itself. We cannot go beyond the description of the goods under Entry No.6 as given in the statute. As is well accepted, a taxing statute has to be strictly construed. The order imposing penalty, the reasons for imposition of penalty as well as the quantum of penalty must be discernible.This will reflect application of mind by the authority imposing the penalty and also allow the higher authorities to examine the reasons assigned for imposition of penalty in the event of appeal or revision. The order of penalty must indicate that all relevant factors were taken into consideration before imposing penalty. The discretionary power to impose penalty must be exercised in a reasonable and rational manner, otherwise it would be arbitrary and capricious. Penalty set aside. - Decided in favour of appellant. Having regard to the classification, we are of the clear opinion that the view taken by the Revenue that pressure cooker does not come within the ambit of Entry No.6 of Part-A General of the Second Schedule to the VAT Act appears to be the correct view and we see no reason to interfere with the decision taken by the revenue authorities in this regard. - Decided against the appellants.

Summary

Issues Involved:
1. Applicability of tax rate on pressure cookers under the Assam Value Added Tax Act, 2003.
2. Imposition of additional tax and penalty for default in payment of due tax.

Detailed Analysis:

Issue 1: Applicability of Tax Rate on Pressure Cookers
The primary issue across the writ petitions is whether pressure cookers sold by the petitioners fall under Entry No. 6 of Part-A General of the Second Schedule to the Assam Value Added Tax Act, 2003, attracting a tax rate of 4%, or under Entry No. 1 of the Fifth Schedule, attracting a tax rate of 12.5%. The Revenue contends that pressure cookers are not covered under Entry No. 6 and should be taxed at 12.5% as per the Fifth Schedule's residuary list.

- Petitioners' Argument: Pressure cookers are made of aluminium and should be treated as aluminium utensils under Entry No. 6, thus attracting a 4% tax rate. They argue that minor use of other materials does not change the classification. They also cite uniform taxation across other states where pressure cookers are taxed at 4%.

- Revenue's Argument: Pressure cookers are not commonly understood as aluminium utensils due to their composition, which includes steel valves, rubber gaskets, and insulating materials. Hence, they do not qualify under Entry No. 6 and should be taxed as residuary items under Entry No. 1 of the Fifth Schedule at 12.5%.

- Court's Analysis: The court found the Revenue's argument plausible, noting that the legislative intent behind Entry No. 6 is clear in its exclusion of items like pressure cookers. The court emphasized that a taxing statute must be strictly construed and that the classification in the Central Excise Tariff Act cannot override state legislation.

Issue 2: Imposition of Additional Tax and Penalty
In one of the writ petitions, an additional issue of consequential assessment was raised, involving the levying of a higher tax rate of 12.5% and the imposition of penalties for default in tax payment.

- Petitioners' Argument: The imposition of penalty is not automatic and must be preceded by a hearing. The penalty order must be a speaking order, reflecting reasons for the imposition and the quantum of penalty.

- Court's Analysis: The court referred to its earlier decision in WP(C) No. 4112/2007, which held that imposition of penalty requires discretion and application of mind. The order must reflect reasons for the imposition and the quantum of penalty. In WP(C) No. 840/2008, the court found that the order dated 31.12.2007 lacked reasons and did not show application of mind, thus invalidating the imposition of penalty.

Conclusion:
The court upheld the Revenue's view that pressure cookers do not fall under Entry No. 6 of Part-A General of the Second Schedule and should be taxed at 12.5% under the Fifth Schedule. However, the imposition of penalties was set aside due to lack of justified reasoning and application of mind in the penalty orders. The writ petitions were disposed of accordingly, and interim orders were vacated.