2022 (1) TMI 308 - HC - VAT and Sales Tax

Classification of goods - rate of tax applicable to the furniture sold by the dealer - taxable at 5% or 13.5%? - HELD THAT - In the case on hand the Tribunal, without referring to the Rules of Interpretation of Schedules under KVAT Act, has independently considered and recorded a finding in favour of the dealer that the dealer is entitled to rate of tax at 5% on the furniture sold under the head 'woodmarquetry'. The judgment of the Supreme Court in RECKITT BENCKISER (INDIA) LTD. VERSUS COMMISSIONER, COMMERCIAL TAXES AND OTHERS 2008 (4) TMI 489 - SUPREME COURT has taken note of an omission on the part of this Court while disposing of a matter, where the Rules of Interpretation ought to have been considered but not considered while disposing of the case in the reported judgment and, after taking note of the review involved, set aside the judgment of this Court, remitted the matter to this Court for consideration and disposal afresh. In the circumstances of this case, the adjudication of the CESTAT cannot be treated as the conclusive circumstance in favour of the dealer. The dealer now claims rate of tax at 5% payable on a particular type of furniture sold by the dealer. The dealer will have to establish as a matter of fact and the fact so established in a sequential way corresponds to the HSN Code described in Customs Tariff Act, 1975 - Matter remitted to Tribunal for consideration and disposal afresh in accordance with law.

Summary

Issues:
1. Interpretation of tax rate applicable to furniture sold by a dealer under the Kerala Value Added Tax Act, 2003.
2. Application of Rules of Interpretation of Schedules under the KVAT Act in determining the tax rate.
3. Consideration of previous judgments and their persuasive value in the current case.

Issue 1: Interpretation of Tax Rate Applicable to Furniture:
The High Court considered the case involving M/s Tiptop Furniture Pvt. Ltd., a dealer registered under the Kerala Value Added Tax Act, 2003, who was transporting furniture with a tax rate discrepancy. The dealer claimed a 5% tax rate, but the authorities alleged the applicable rate should be 13.5%. The Tribunal allowed the dealer's appeal, prompting the Revenue to file revisions. The Court reviewed the arguments for both rates and concluded that reclassifying the goods would essentially involve reexamining the dealer's circumstances, which was unwarranted. The dealer's claim was based on the classification of goods as "wood marequetry and inlaid wood," falling under Entry 54 of the Act's Schedule.

Issue 2: Application of Rules of Interpretation of Schedules:
The Court highlighted the importance of the Rules of Interpretation of Schedules under the KVAT Act in resolving disputes like the present one. It noted the omission by the Tribunal in not referring to these rules while deciding the case. The Court emphasized that these rules serve as guiding principles for authorities to ensure consistency in applying the Act's provisions. By not adhering to these rules, the Tribunal's decision was deemed erroneous, leading to the setting aside of the order and remitting the matter back to the Tribunal for a fresh consideration in line with the legal guidelines.

Issue 3: Consideration of Previous Judgments and Persuasive Value:
The Court discussed the dealer's reliance on a previous judgment by the CESTAT, which was subsequently confirmed by the Supreme Court, regarding a similar classification issue. While acknowledging that the CESTAT's decision is not binding, the Court recognized its persuasive value. However, the Court emphasized that the Tribunal's failure to consider the Rules of Interpretation of Schedules under the KVAT Act rendered its decision illegal. The Court, therefore, set aside the Tribunal's order and remitted the case for a fresh consideration, allowing the dealer to present relevant evidence and arguments in support of the claimed 5% tax rate.

In summary, the High Court's judgment in this case focused on the correct interpretation of the tax rate applicable to furniture sold by a dealer under the KVAT Act. It underscored the significance of adhering to the Rules of Interpretation of Schedules to ensure consistency and legality in decisions regarding tax classifications. The Court's decision to remit the matter back to the Tribunal highlighted the necessity of following legal guidelines and considering all relevant factors in resolving tax disputes effectively.