2019 (5) TMI 223 - HC - VAT and Sales Tax

Classification of goods - Warp Knit Fabrics - whether the Warp Knit Fabrics is included under Schedule I, Entry 48 or Schedule II Part 2 Entry 34 of the MP VAT Act, 2002? - HELD THAT - The Warp Knit Fabrics is falling under Heading 60059000 of the Central Excise Tariff. The said product is listed in the goods of special importance under the Additional Duty of Excise (Goods of Special Importance) Act, 1957. The duty is leviable @ 12%, however, on account of the notification dated 9/7/2004, it is exempted from payment of duty. The Central Excise Service Tax Appellate Tribunal, (CESTAT) West Zonal, while deciding the appeal has classified Warp Knit Fabrics under Heading 60059000, Chapter 60 of the Central Excise Tariff. In the present case, there is no dispute that Schedule I, Entry 48 refers to a classification provided under the I Schedule to the Additional Duties of Excise (Goods of Special Importance Act) 1957 and, therefore, the classification done under the Central Excise Tariff has to be accepted especially when MP VAT Act, 2002 Schedule refers to the Tariff Heading / classification under the Central Excise Act. The findings arrived at by the Assessing Officer in holding that the goods are not included in Entry 48 of Schedule I of the MP VAT Act, 2002 is therefore, bad in law - By no stretch of imagination, the goods can be treated to be included under Entry 34 List 2 of the MP VAT Act, 2002 hence, the question of payment of duty @ 5% does not arise. In the present case, the classification issue has been decided u/S. 70 of the MP VAT Act, 2002 by the Commissioner and appeal to the Addl. Commissioner is certainly going to be an empty formality. This Court is of the considered opinion that the present petitions cannot be thrown out on the ground of availability of alternative remedy before the Asstt. Commissioner as the higher authority ie., the Commissioner has already decided the issue of classification under Section 70 of the MP VAT Act, 2002 on 14/1/2003 - Petition allowed.

Summary

Issues Involved:
1. Classification of Warp Knit Fabrics under the MP VAT Act, 2002.
2. Applicability of alternative remedy in the context of the classification dispute.
3. Interpretation of statutory provisions under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Issue-wise Detailed Analysis:

1. Classification of Warp Knit Fabrics under the MP VAT Act, 2002:

The petitioner, a company engaged in the manufacture of Warp Knit Fabrics, challenged the order dated 26/12/2015 by the Dy. Commissioner, Commercial Tax, Indore, which imposed a 5% VAT on Warp Knit Fabrics under Entry No. 34 of Schedule II of the MP VAT Act, 2002. The petitioner argued that Warp Knit Fabrics should be classified under Entry 48 of Schedule I, which lists tax-free goods, as it falls under Heading No. 60059000 of the Central Excise Tariff and is listed in the Goods of Special Importance under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

The court noted that the Commissioner of Commercial Tax had previously classified Warp Knit Fabrics under Entry 34 of Schedule II in the case of M/s. SR Polyimpex Pvt. Ltd. and M/s. Neo Corp International Ltd. The court examined the relevant statutory provisions and concluded that Warp Knit Fabrics falls under Heading 60059000 of the Central Excise Tariff, as confirmed by the Central Excise & Service Tax Appellate Tribunal (CESTAT) and the Commissioner Appeals, Central Excise. Therefore, the court held that the product should be classified under Entry 48 of Schedule I of the MP VAT Act, 2002, and the impugned order was quashed.

2. Applicability of Alternative Remedy in the Context of the Classification Dispute:

The respondents argued that the petitioner had an alternative remedy to appeal before the Additional Commissioner and the Tribunal. However, the court observed that since the Commissioner of Commercial Tax had already decided the classification issue under Section 70 of the MP VAT Act, 2002, an appeal to an authority subordinate to the Commissioner would be a futile exercise. The court cited precedents, including the apex court's decision in Asstt. Commissioner, Commercial Tax vs. Amara Raja Batteries, which justified entertaining the writ petition directly against the assessment order when an appeal would be an idle formality. Therefore, the court held that the writ petition was maintainable despite the availability of an alternative remedy.

3. Interpretation of Statutory Provisions under the Additional Duties of Excise (Goods of Special Importance) Act, 1957:

The court referred to the First Schedule of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, which specifies the classification of goods. The court noted that Warp Knit Fabrics are included in the list of goods of special importance under this Act and are classified under Heading 60059000 of the Central Excise Tariff. The court emphasized that the classification under the Central Excise Tariff should be accepted, especially when the MP VAT Act, 2002, Schedule refers to the Tariff Heading/classification under the Central Excise Act. Therefore, the court concluded that the goods in question should be treated under Entry 48 of Schedule I of the MP VAT Act, 2002, and the question of payment of duty at 5% does not arise.

Conclusion:

The court allowed the writ petitions, quashing the impugned orders and setting aside the classification of Warp Knit Fabrics under Entry 34 of Schedule II. The court held that the goods fall under Entry 48 of Schedule I of the MP VAT Act, 2002, and are therefore tax-free. The court also placed a copy of the order in the records of the connected writ petitions.