2022 (4) TMI 127 - HC - VAT and Sales Tax

Classification of goods - marble articles - falls under Entry 13 of Part E of the First Schedule to the TNGST Act or not - marble stone articles, can be treated as handicrafts or not - HELD THAT - It is pertinent to refer to the decision of the Hon'ble Supreme Court in COLLECTOR OF CENTRAL EXCISE, NEW DELHI VERSUS LOUIS SHOPPE 1995 (3) TMI 108 - SC ORDER , wherein, it was held that the authorities shall examine the matter, as to whether wooden furniture by itself can be treated as handicrafts, which may be characterised as handicrafts, if the following tests are satisfied and thereafter, pass orders accordingly - (1)It must be predominantly made by hand. It does not matter if some machinery is also used in the process; and (2) It must be graced with visual appeal in the nature of ornamentation or inlay work or some similar work lending it an element of artistic improvement. Such ornamentation must be of a substantial nature and not a mere pretence . In the present case, the first respondent / Tribunal without examining the characteristic of the articles made by the petitioner, has formed an opinion that the marble stone items would not fall under the category of handicrafts, but come under Entry 13 of Part E of the First Schedule, treating the same as stone articles. Such course adopted by the Tribunal, in the opinion of this court, cannot be countenanced, in the light of the aforesaid legal proposition of the Hon'ble Supreme Court - thus, it is clear from the proceedings that the handmade stone works, sculptures and stone reliefs, stone inlay work, can be treated as 'Handicrafts'. It is not in dispute that the petitioner is handling stone articles and therefore, marble stone items made by them, fall within the category of 'Handicrafts'. The writ petition stands allowed.

Summary

Issues:
1. Classification of marble stone articles for tax assessment under TNGST Act.
2. Interpretation of whether the marble stone articles qualify as 'handicrafts' for taxation purposes.

Issue 1: Classification of marble stone articles for tax assessment under TNGST Act

The petitioner, a Non-Profit Charitable Trust, challenged the order of the Tamil Nadu Sales Tax Appellate Tribunal, which classified marble stone articles as stone articles taxable at 16% under Entry 13 of Part E of the First Schedule. The petitioner contended that the marble stone articles should be taxed at 8% as handicrafts under Entry 22-A of Part C of the First Schedule. The Appellate Assistant Commissioner initially ruled in favor of the petitioner, but the Tribunal overturned this decision, leading to the writ petition.

The High Court analyzed the facts and legal provisions. It noted that the petitioner dealt exclusively with handicraft articles, specifically carved marble items made by skilled artisans. The court highlighted the discrepancy in classification between the assessing officer, the appellate authority, and the Tribunal. The court emphasized the need to determine whether the marble stone articles could be considered 'handicrafts' for tax assessment purposes.

Issue 2: Interpretation of whether the marble stone articles qualify as 'handicrafts' for taxation purposes

The High Court referred to a Supreme Court decision outlining criteria for determining handicrafts, emphasizing the manual craftsmanship and artistic appeal of the products. The court criticized the Tribunal's failure to assess the characteristics of the petitioner's articles properly. Additionally, the court referenced a clarification from the Commercial Taxes Department, which explicitly categorized handmade stone works, sculptures, and reliefs as 'Handicrafts' under specific entries of the TNVAT Act.

Based on the legal principles and the clarification provided by the Commercial Taxes Department, the High Court concluded that the marble stone articles made by the petitioner fell within the definition of 'Handicrafts.' Therefore, the court allowed the writ petition, setting aside the Tribunal's order and ruling in favor of the petitioner. No costs were awarded, and the connected miscellaneous petition was closed.

This detailed analysis of the judgment highlights the classification dispute regarding marble stone articles and the crucial interpretation of whether they qualify as 'handicrafts' for taxation under the TNGST Act. The court's decision provides clarity on the classification and tax assessment of such products, emphasizing the importance of legal principles and official clarifications in resolving taxation disputes.