2016 (12) TMI 1429 - HC - VAT and Sales Tax

Classification of goods sold - Rigid Frame Columns (RFC) - classifiable under section 14(iv)(v) of the Central Sales Tax Act, 1956 read with Entry C-55(v) of the Maharashtra Value Added Tax Act, 2002 or are classifiable under the Residuary Entry of the Maharashtra Value Added Tax, 2002 - whether the RFCs manufactured by the Appellant would fall within section 14(iv)(v) of the CST Act and Schedule Entry C-55(v) of MVAT Act? - interprtation of statute - Held that - Merely because steel structurals or angles or joists etc are manufactured by the process of welding, would not take it outside the scope of section 14(iv)(v) of the CST Act or Schedule Entry C- 55(v) of the MVAT Act respectively. It is merely a new process by which steel structurals are now manufactured considering the advancement in technology. This by itself, with nothing more, would not disentitle steel structurals from being classified under section 14(iv)(v) of the CST Act or Schedule Entry C-55(v) of the MVAT Act. The description of the goods in the invoice is not something which would determine classification of their goods in a particular Entry. What has to be seen is whether the goods sold by the Appellant fit the description of a specific Entry in the tariff schedule and only when it does not fall within a specific Entry, the residuary Entry should be resorted to. RFCs manufactured and sold by the Appellant would be squarely covered by Schedule Entry C-55(v) of the MVAT Act and section 14(iv)(v) of the CST Act - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Classification of Rigid Frame Columns (RFCs) under the Maharashtra Value Added Tax Act, 2002 (MVAT Act) versus the Central Sales Tax Act, 1956 (CST Act).
2. Interpretation of the term "steel structurals" in the context of tax classification.
3. Applicability of the principle of ejusdem generis.
4. Relevance of product description in invoices for tax classification.
5. Technological advancements and their impact on tax classification.

Issue-wise Detailed Analysis:

1. Classification of Rigid Frame Columns (RFCs):
The primary issue was whether RFCs sold by the Appellant should be classified under the Residuary Entry E-1 of the MVAT Act or under section 14(iv)(v) of the CST Act read with Schedule Entry C-55(v) of the MVAT Act. The MSTT held that RFCs were classifiable under the Residuary Entry E-1. The Appellant argued that RFCs should be classified under section 14(iv)(v) of the CST Act, which deals with "steel structurals," and thus fall under Schedule Entry C-55(v) of the MVAT Act. The court concluded that RFCs are indeed "steel structurals" and should be classified under Schedule Entry C-55(v) of the MVAT Act.

2. Interpretation of the Term "Steel Structurals":
The Appellant contended that the term "steel structurals" as used in section 14(iv)(v) of the CST Act and Schedule Entry C-55(v) of the MVAT Act includes RFCs. The court noted that "steel structurals" are not defined in either the CST Act or the MVAT Act. The court referred to various sources, including Wikipedia and technical books, to conclude that "steel structurals" are understood as steel construction materials formed with specific shapes or cross sections. The court held that the term "steel structurals" includes RFCs, which are components used in constructing buildings.

3. Applicability of the Principle of Ejusdem Generis:
The MSTT applied the principle of ejusdem generis in reverse, concluding that "steel structurals" must be limited to "rolled sections" like angles, joists, channels, tees, sheet piling sections, and Z sections. The court disagreed, stating that the words in parenthesis are illustrative and not exhaustive. The court emphasized that the principle of ejusdem generis should not be applied in reverse, as it limits the scope of the general term "steel structurals" improperly.

4. Relevance of Product Description in Invoices:
The MSTT concluded that the description of goods in the invoice did not match the description in Schedule Entry C-55(v) of the MVAT Act. The court held that the description in the invoice does not need to exactly match the description in the tariff schedule. What is important is whether the product falls within the description used in the tariff schedule. The court found that the RFCs sold by the Appellant fit the description of "steel structurals" in Schedule Entry C-55(v) of the MVAT Act.

5. Technological Advancements and Their Impact on Tax Classification:
The court recognized that technological advancements must be considered in tax classification. The improved welding techniques and availability of low carbon steel make welding a viable option for manufacturing steel structurals. The court held that the process of manufacturing, whether by rolling or welding, should not affect the classification of RFCs as "steel structurals."

Conclusion:
The court set aside the MSTT's order and held that RFCs are classifiable under Schedule Entry C-55(v) of the MVAT Act and section 14(iv)(v) of the CST Act. The court answered the first question of law in the negative and in favor of the Appellant, and the second question of law in the affirmative and in favor of the Appellant. The court left the parties to bear their own costs. Consequently, the related motions and summons were disposed of accordingly.

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