2014 (8) TMI 1226 - HC - VAT and Sales Tax

Classification of goods - rate of tax - after water proofing compound and construction material imported by the dealer - Whether liable to tax @ 4% as chemical and not as unclassified item? - section 59 of U.P. Value Added Tax Act - HELD THAT - It is not in dispute that Excise Code of Acrylic Polymers under the Central Excise Tariff Act, 1985 is 3906000 and the applicant department has also given the very code number to the product falling under Entry No. 162 of Part-C of Schedule IInd to the Act. On this basis, the tribunal has recorded a finding that product has to be accepted as the goods under Entry No. 162. The contention of the assessee was rejected by the Assessing Officer on the ground that this product is only a water proofing / construction chemical. The Tribunal has also recorded a finding of fact that there is no denial of the claim of the appellant that bye products of Acrylic Polymer are included in entry Polymer in primary form with main code 3906000. So far as the other commodity i.e. CICO Super Plast is concerned, the case of the assessee is that this commodity is used as water reducing agent and as reaction accelerator for giving extra strength to the concrete after its use and as such this is chemical falling under Entry 29 of Part A of Schedule IInd to the Act. The assessing authority treated this commodity as Water Proofing Compound and Construction Chemical - there are no infirmity in the findings of facts recorded by the Tribunal. The applicants have not shown any perversity in the findings of fact recorded by the Tribunal. Under the circumstances the matter is concluded by findings of fact. The tribunal has rightly held that the aforesaid two products are liable to tax @ 4%. Revision dismissed.

Summary

Issues Involved:
1. Classification of "CICO Tap Crete" and "CICO Super Plast" under the U.P. Value Added Tax Act, 2008.
2. Determination of applicable tax rate for these products.
3. Burden of proof regarding product classification.

Detailed Analysis:

Issue 1: Classification of "CICO Tap Crete" and "CICO Super Plast" under the U.P. Value Added Tax Act, 2008

The primary issue is whether "CICO Tap Crete" and "CICO Super Plast" should be classified as chemicals under specific entries of the U.P. VAT Act or as unclassified items. The Tribunal held that "CICO Tap Crete" falls under Entry No. 162 of Part C of the IInd Schedule, which covers "Acrylic polymers in primary forms," and should be taxed at 4%. The Tribunal also classified "CICO Super Plast," a water-reducing agent and reaction accelerator used in concrete, under Entry No. 29 of Part A of the IInd Schedule, which includes various chemicals, and should be taxed at 4%.

Issue 2: Determination of Applicable Tax Rate

The Tribunal's decision was based on the interpretation of the relevant entries in the U.P. VAT Act. For "CICO Tap Crete," the Tribunal found that the product is an acrylic polymer, supported by the fact that the State Government had assigned the same excise code (39060000) as used in the Central Excise Tariff Act, 1985. This classification was not disputed by the Assessing Officer or the Additional Commissioner, who admitted that the product is acrylic polymer-based.

For "CICO Super Plast," the Tribunal examined its chemical composition and usage. The product, available in four variants, was found to be composed of sulphonated napthelene formaldehyde and organic polymers, both recognized as chemicals. The Tribunal concluded that these products are chemical admixtures used in concrete, thus falling under Entry No. 29 of Part A of the IInd Schedule, and should be taxed at 4%.

Issue 3: Burden of Proof Regarding Product Classification

The Tribunal emphasized that the burden of proof lies with the Assessing Officer to provide evidence if they intend to reject the assessee's classification claim. The Assessing Officer and the Additional Commissioner failed to provide such evidence, relying instead on the product's usage as a water-proofing compound. The Tribunal noted that the product's use does not alter its chemical nature, and thus, the classification should be based on its chemical composition.

Conclusion:

The Tribunal's findings were upheld by the High Court, which found no infirmity in the Tribunal's decision. The High Court agreed that "CICO Tap Crete" and "CICO Super Plast" are correctly classified under the specified entries in the U.P. VAT Act and should be taxed at 4%. The revisions filed by the revenue were dismissed, affirming the Tribunal's order in favor of the assessee. The question of law was answered in the affirmative, supporting the assessee's classification and tax rate claims.