2015 (9) TMI 359 - HC - VAT and Sales Tax

Classification of Fire Bricks Entry 32, schedule I and Schedule VII Assessing authority taxed sale of fire bricks as goods falling under entries 32 of 1st schedule Deputy Commissioner revised order of authority treating them as unclassified goods / general goods falling under Schedule VII Tribunal vide impugned order set aside order of commissioner and classified goods under entry 32 Held that - usage of these refractory bricks in regular construction work cannot be ruled out, especially considering fact of their quality of heat resistance Supreme court in Advance Bricks case 1987 (9) TMI 379 - SUPREME COURT OF INDIA accepted contention of dealer that in absence of classification of entry generic meaning of term in common parlance and dictionaries has to be accepted Taking into consideration of huge variation in prices of sun-dried bricks to that of fire burnt bricks, Supreme Court accepted that sun-dried bricks and fire burnt bricks are of two categories, in absence of specific entry being there generic and natural meaning had to be given to entry and same would have to be taxed as falling in same entry Thus, Revision dismissed Decided against revenue.

Summary

Issues:
1. Classification of fire bricks under the APGST Act
2. Justification of setting aside revisional orders by the Deputy Commissioner

Issue 1: Classification of fire bricks under the APGST Act

The case involved a dispute regarding the classification of fire bricks manufactured and sold by the appellant under the APGST Act. The assessing authority initially taxed the sale of these bricks under Entry 32 of the 1st Schedule, which includes bricks, tiles, and stones. However, the Deputy Commissioner revised this classification, treating the bricks as unclassified goods under Schedule VII, which had a higher tax rate. The Tribunal, after considering the nature and use of the bricks, held that they fell under Entry 32 as they were primarily used for construction in high-temperature structures like furnaces and boilers. The Tribunal referred to previous judgments and the common understanding of bricks to support its decision, emphasizing that the end-user test was crucial in determining the classification. The High Court agreed with the Tribunal's reasoning, stating that fire bricks, despite being fire-resistant, were still bricks in shape, nature, and use, falling under Entry 32. The judgment highlighted that even though fire bricks could withstand high temperatures, they were fundamentally bricks and should be taxed accordingly.

Issue 2: Justification of setting aside revisional orders by the Deputy Commissioner

The second issue revolved around the Deputy Commissioner's revisional orders being set aside by the Tribunal. The Deputy Commissioner had reclassified the fire bricks as unclassified goods under Schedule VII, leading to a higher tax rate compared to Entry 32. The Tribunal, however, overturned this decision, emphasizing that the bricks were indeed covered under Entry 32 due to their use in construction for heat-resistant purposes. The High Court, in line with the Tribunal's findings, rejected the Deputy Commissioner's classification and upheld the Tribunal's decision. The judgment highlighted the importance of the generic meaning of terms and the common understanding of goods in determining their classification under the law. The High Court concluded that there could not be selective appeals without distinctive features and ruled in favor of the dealer, dismissing the Tax Revision Case.

In summary, the judgment clarified the classification of fire bricks under the APGST Act, emphasizing their use in construction for high-temperature structures. It upheld the Tribunal's decision to classify the bricks under Entry 32, rejecting the Deputy Commissioner's reclassification. The judgment highlighted the significance of the common understanding of goods and the end-user test in determining their classification, ultimately ruling in favor of the dealer and dismissing the Tax Revision Case.