2024 (5) TMI 615 - HC - VAT and Sales Tax

Classification of goods - rate of tax - Nylon Chips - plastic granules or not - absence of Form-C and F - to be classified under Section 29 (1) (c) of Uttarakhand Value Added Tax Act - re-assessment on the basis of change of opinion - Extended period of Limitation - HELD THAT - In the present case, the department has taken a different view by changing the nature of the product, and not on account of wrong application of rates. Re- assessment, in such type of situation, is prohibited. The assessment order was a clear change of opinion, and was not under Section 29 (1) (c). The other ground taken by the respondent was that the impugned order was illegal, as Section 29 (4) of the Uttarakhand Value Added Tax Act does not apply to the present case. In the instant case, the assessment year ended on 31.03.2012, and the period of limitation is to be counted from 31.12.2012. Three years nine months from that date is 30.09.2016, and the authorization notice dated 27.02.2017, under Section 29 (4) of the Act, was issued beyond the period of limitation. The second notice was sent on 29.11.2016, and limitation had expired on 30.09.2016. Extended period of Limitation - HELD THAT - For seeking the benefit of enlarged period of limitation, under Section 29 (4) of the Act, reasons in writing have to be given. Moreover, there is no suppression of facts, or evidence by the respondent, with the intention to evade the payment of VAT. There is no reason given in the authorisation order and the impugned order, justifying the applicability of Section 29 (4) of the Act, where the time period of assessment, under the regular Section 29(3), had already expired. In the present case, the Assessment Year is 2010-11, and before the end of six years, the reassessment order can be passed. The reassessment order has been passed on 25.03.2017, which is before the end of six years of the Assessment Year 2010-11, and hence the reassessment order passed under Section 29 (4) of the Act was done within limitation, and this aspect has been affirmed by the Tribunal, and the Appeals, qua this ground, has been rightly dismissed. Whether Nylon Chips manufactured by the appellant are covered by Entry 83 of Schedule-(II) (B) of the Act? - HELD THAT - Nylon will come under the plastic group, i.e. Plastics. The polymer manufactured by the respondent-company has been accepted to be cut into small sizes of 2 to 4 millimeters and sold to the customers. This can be called granules, which was evident from the samples presented by the respondent-company before the Tribunal at the time of hearing. After going through the order passed by the Tribunal, the appellant-department have themselves accepted that, with respect to the Plastic Granules, when they are put into procedure by adding fillers and additives, the strength of the plastic becomes better. Further, as per the opinion given by the British Plastics Federation, and Central Institute of Plastics Engineering Technology (CIPET), Nylon refers to a group of Plastics known as Polyamide, and there is no change in the original material (raw material) in this manufacturing process of Nylon-6. Hence, the use of raw material, i.e. Plastic Granules to produce Nylon Chips will not alter the character of Nylon Chips, being a Plastic, and under the British Plastics Federation, Nylon is considered under the Plastics group. There is no substantial question of law, which requires to be considered in the present Revision. The Nylon Chips have been rightly held to be falling in Entry 83 of Schedule II (B) of the Act by the Tribunal. There is no merit in the present Revision, and the same is, accordingly, dismissed.

Summary

Issues involved:
The judgment involves issues related to the applicability of tax on self-manufactured Nylon Chips under the Uttarakhand Value Added Tax Act, specifically focusing on the correctness of the tax rate applied and the classification of Nylon Chips under Schedule II (B) Entry 83.

Details of the judgment:

Issue 1: Correctness of Tax Rate Application
The State filed a Revision against the Commercial Tax Tribunal's order concerning the tax amount on self-manufactured Nylon Chips. The Assessing Officer imposed tax liability based on the absence of Form-C and F Central sale, taxing the amount at 13.5%. The First Appellate Authority upheld this decision, considering Nylon Chips as a separate commodity not covered by Schedule-II. The Tribunal deliberated whether reassessment u/s 29(4) could be based on a change of opinion or if it was a clear change of opinion not falling under Section 29(1)(c).

Issue 2: Classification of Nylon Chips
The Tribunal analyzed whether Nylon Chips manufactured by the appellant fell under Entry 83 of Schedule II (B) as "Plastic Granules." The definition of "Plastics" was examined, referencing various sources like the Hon'ble Supreme Court's judgment in Chemicals and Fibers of India Ltd. v. Union of India. The Tribunal concluded that Nylon Chips were indeed Plastic Granules under Entry 83, supported by evidence from technical books and certifications from organizations like CIPET. The manufacturing process and characteristics of Nylon Chips aligned with the definition of Plastic Granules, confirming their classification under the Act.

Conclusion:
The Tribunal affirmed that the reassessment order was within the statutory limitation and correctly classified Nylon Chips as Plastic Granules under Entry 83 of Schedule II (B). The Revision was dismissed as there was no substantial question of law to be considered, upholding the Tribunal's decision regarding the tax liability on Nylon Chips.