2020 (6) TMI 548 - HC - VAT and Sales Tax

Rate of tax - classification of goods - sales of sports shoes and sports apparel - whether taxable under Entry 46 and Entry 52 of IV Schedule respectively, or they fall under the residuary entry falling under V Schedule? - HELD THAT - The term Footwear in Entry 46 of IV Schedule includes sports shoes and the D.C.T.O.- II (Enforcement Wing) could not have held that they fall under residuary entry under V Schedule, and he ought to have held that they fall under Entry 46 of IV Schedule; and the Tribunal was right in not only relying on the certificates of the suppliers that the shoes were made of plastic but also on the Government Memo dt.17.10.2008 holding that moulded plastic footwear described in Entry 46 also includes not only the footwear of one moulded plastic piece but also more than one piece moulded and joined together. When the Department authorities did not make any product verification, they could not have changed the classification of the sports shoes from Entry 46 in Schedule IV, which they had been doing for the previous ten years, to the residuary Entry in V Schedule. Sports Apparel - HELD THAT - The word garments in Entry 52 of IV Schedule is of wide import and sports apparel would fall under the said entry and the Tribunal did not commit any error in taking that view. Revision dismissed.

Summary

Issues:
1. Interpretation of tax liability on 'sports shoes' and 'sports apparel' under the Telangana Value Added Taxes Act, 2005.

Analysis:
The State of Telangana filed revisions challenging orders passed by the Telangana VAT Appellate Tribunal regarding the tax liability of a registered dealer for 'sports shoes' and 'sports apparel'. The Assessing Authority held that these items fell under the residuary entry in Schedule V, attracting a tax rate of 14.5%. However, the Appellate Deputy Commissioner disagreed, stating that 'sports shoes' with multiple moulds do not fit under Entry 46 of Schedule IV and 'sports apparel' are not equivalent to 'ready-made garments'. The Tribunal noted a government memo clarifying that 'moulded plastic footwear' includes multiple moulds and criticized the lack of reasoning by the Assessing Authority. The Tribunal also highlighted the historical classification of these items under Entry 46 and Entry 52 of Schedule IV and the absence of product verification by the Department before changing the classification.

The Tribunal emphasized certificates from suppliers confirming the material of the sports shoes and referenced previous tax rulings classifying them under Entry 46 of Schedule IV. Citing a judgment from the Allahabad High Court, the Tribunal concluded that 'sports shoes' are considered 'footwear' and fall under Entry 46. Regarding 'sports apparel', the Tribunal found that the term 'garments' in Entry 52 has a broad scope, encompassing 'sports apparel'. The Tribunal rejected the State's claim of perversity in its findings, upholding its interpretation. Consequently, the revisions were dismissed, and no costs were awarded. Any related pending petitions were closed as a result of this judgment.