2018 (6) TMI 1661 - HC - VAT / Sales Tax

Validity of assessment order - reduction in tax liability - bitumen emulsion purchased by the petitioner outside the State - Section 49(1) of the Chhattisgarh Value Added Tax Act, 2005 - It is the case of the petitioner that he is paying purchase tax on purchase of bitumen emulsion from unregistered dealers outside the State and using the same / bitumen in execution of works contract. Whether the assessing authority and the revisional authority are justified in holding that bitumen emulsion would not fall within Entry 23 under Part II of Schedule-II appended to the VAT Act and would fall within the residuary entry and VAT would be chargeable at the rate of 12.5%? HELD THAT - The Supreme Court in A.R. Thermosets Private Limited's case 2016 (9) TMI 410 - SUPREME COURT considered the question as to whether bitumen and bitumen emulsion are one and the same commodity for the purposes of interpretation of Entry 22 of Part A of Schedule II to the U.P. Value Added Tax Act, 2008 as was originally enacted and whether bitumen emulsion is covered within Entry 22 of Part A of Schedule II to the U.P. Value Added Tax Act, 2008 which only refers to bitumen . Their Lordships after detailed analysis of various dictionaries as well as Encyclopedia of Science and Technology defining bitumen held that the entry in question uses the word bitumen without any further stipulation or qualification and further held that bitumen emulsion is processed bitumen. Reverting to the facts of the present case, it is quite vivid that it has been held herein-above by the Supreme Court also while dealing with the question whether bitumen emulsion is covered within Entry 22 of Part A of Schedule II to the U.P. Value Added Tax Act, 2008, which only refers to bitumen that bitumen includes bitumen emulsion. It has also been held that the words inside the brackets i.e. coal-tar in front of bitumen would not control the meaning of the words outside the bracket and it would not curtail or limit the scope of the words employed outside the bracket. The word bitumen is also known as commercially, coal-tar as such, the word coal-tar in brackets in front of bitumen is only clarificatory in nature and would not control the meaning and scope of the word bitumen in Entry-23 under Part II of Schedule-II of the VAT Act. The bitumen emulsion is covered by Entry-23 of Part II of Schedule-II of the VAT Act and rate of VAT would be 4% or applicable rate as per notification. Petition allowed.

Summary

Issues Involved:
1. Classification of bitumen emulsion under Chhattisgarh Value Added Tax Act, 2005.
2. Applicability of the correct rate of tax for bitumen emulsion.
3. Interpretation of tariff entries and the role of parenthesis in statutory interpretation.

Issue-wise Detailed Analysis:

1. Classification of Bitumen Emulsion:
The petitioner, a sole proprietorship firm, argued that bitumen emulsion should be classified under Entry-23 of Part II of Schedule-II of the Chhattisgarh Value Added Tax Act, 2005 (VAT Act), which specifies a tax rate of 4% for bitumen (coal-tar). The revisional authority, however, classified bitumen emulsion under the residuary entry, applying a tax rate of 12.5%. The Court, relying on the Supreme Court's decision in A.R. Thermosets Private Limited, held that bitumen emulsion is a processed form of bitumen and thus should be classified under Entry-23, as it shares the same composition, commercial identity, and use as bitumen.

2. Applicability of the Correct Rate of Tax:
The petitioner contended that the correct rate of tax for bitumen emulsion should be 4% as per Entry-23 of Schedule-II of the VAT Act. The Court noted that the State failed to provide strong evidence to support the classification of bitumen emulsion under the residuary entry. The Court concluded that bitumen emulsion, being essentially bitumen, should be taxed at the rate specified in Entry-23, which is 4%.

3. Interpretation of Tariff Entries and Role of Parenthesis:
The Court examined whether the term "coal-tar" in parentheses next to "bitumen" in Entry-23 should control the scope of the entry. It referred to various dictionaries and legal precedents, including the Supreme Court's judgments in Fuerst Day Lawson Limited and Dozco India Private Limited, which clarified that words in parentheses are generally illustrative and not exhaustive. The Court held that the term "coal-tar" in parentheses is merely clarificatory and does not limit the scope of "bitumen" in Entry-23. Thus, bitumen emulsion falls within the scope of Entry-23.

Conclusion:
The Court set aside the orders of the assessing and revisional authorities, holding that bitumen emulsion is covered by Entry-23 of Part II of Schedule-II of the VAT Act. Consequently, the applicable tax rate for bitumen emulsion is 4%, or the rate specified in the relevant notification. The writ petitions were allowed accordingly.