2022 (5) TMI 388 - HC - VAT and Sales Tax

Classification of goods - unclassified goods - manufacturing of chemical in the brand name of AT-PLAST - whether material produced by the Chemical process and which is used in Chemistry? - whether Commercial Tax Tribunal was justified to hold that the production of the applicant / revisionist AT-PLAST is used with the building material and therefore cannot be said that it is chemical despite the fact the Commissioner has not disputed that it is not a chemical admixture? - HELD THAT - Admittedly the revisionist manufactured AT-PLAST which are being used in mixing of ready mix concrete / concrete and it has been averred by the revisionist that the said product are being used along with concrete for reducing the uses of water delay the time of freezing as well as strengthening the concrete - On close scrutiny of the impugned order it reveals that the Tribunal has neither referred the chemical used in manufacturing of said product nor has given any reference thereof. The Tribunal while coming to the conclusion has held that the goods manufactured and sold by the revisionist are used as building material and therefore justified the order passed by the Commissioner under Section 59 of the Act. The Tribunal being the last Court of fact ought to have considered various evidences as well as materials referred by the revisionist with regard to the chemical analysis report for chemical used in the manufacture of its product but had failed to do so. In the case in hand none of the authorities have discussed raw material / chemicals used in manufacturing of AT-PLAST or the chemical analysis report as furnished by the revisionist in support of its case but had decided the issue which cannot be justified in the eyes of law. The matter is remanded to the Tribunal for deciding the issue afresh - revision is allowed.

Summary

Issues:
Interpretation of tax liability on a chemical product under UP VAT Act - Classification of goods as chemical or building material.

Analysis:
The revision was filed against the order of the Commercial Tax Tribunal regarding the tax liability on a chemical product named 'AT-PLAST'. The key issue revolved around whether the product should be classified as a chemical or a building material for tax purposes. The revisionist argued that 'AT-PLAST' is a water reducing agent used in construction work to reduce water usage in concrete, delay freezing, and strengthen concrete. The revisionist claimed that the product falls under Entry 29 Part A of Schedule II of the UP VAT Act, making it subject to a 4% tax rate as a chemical.

The Commissioner, however, opined that the product should be taxed at 12.5%, a decision upheld by the Tribunal. The revisionist contended that the Tribunal failed to consider the chemical composition of 'AT-PLAST' and wrongly categorized it as a building material. The Tribunal's decision was based on the product's use in construction, overlooking the chemical nature of the goods and the evidence provided by the revisionist regarding the chemicals used in manufacturing.

The Court noted that the Tribunal did not analyze the chemical composition of 'AT-PLAST' or consider the evidence presented by the revisionist. Referring to a prior judgment involving waterproofing components and construction materials, the Court emphasized the importance of correctly classifying items as chemicals for tax purposes. As a result, the Court allowed the revision, set aside the Tribunal's order, and remanded the matter for fresh consideration, instructing the Tribunal to review the case in light of the precedent judgment.

The Court directed the Tribunal to expedite the decision within three months and required the revisionist to serve a copy of the order promptly. Failure to comply would result in the revisionist losing the benefit of the order. The judgment highlighted the significance of properly assessing the chemical nature of products for tax classification purposes and ensuring thorough consideration of evidence in such cases.