2025 (4) TMI 1284 - HC - VAT / Sales Tax

Classifiation of goods - revision in the rate of tax - liquid carbon dioxide - taxable at 5% or 14.5%? - to be classified within Entry-100 (190) in Schedule-IV of the VAT Act or under Entry 100(190)? - time limitation for passing revisional order - revision order was passed after about six years from the date of service of the assessment order. Time limitation for passing revisional order - HELD THAT - In S. Kasi vs. State through the Inspector of Police Samaynallur Police Station Madurai District 2020 (6) TMI 727 - SUPREME COURT the petitioner had sought statutory bail available under Section 167 (2) of the Code of Criminal Procedure on the ground that the charge sheet in his case had not been filed within 60 days of his incarceration or of his being placed in judicial custody. The State contended that the period stipulated under Section 167 (2) Cr.P.C. would stand extended by virtue of the judgment of the Hon ble Supreme Court dated 23.03.2020. The Hon ble Supreme Court after going through the order passed by the Hon ble Supreme Court in IN RE COGNIZANCE FOR EXTENSION OF LIMITATION 2020 (5) TMI 418 - SC ORDER held that To obviate the difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court it is hereby ordered that a period of limitation in all such proceedings irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. In view of the observations of the Hon ble Supreme Court in S. Kasi vs. State through the Inspector of Police Samaynallur Police Station Madurai District which was followed by the Hon ble High Court of Calcutta and High Court of Delhi it must be held that the extension of time granted by the Hon ble Supreme Court in the order dated 23.03.2020 and order dated 10.01.2022 would only extend limitation to litigants who are seeking to approach the appropriate Courts and tribunals and such extension of limitation is not available to an authority acting under any statute. In the circumstances the order of revision is beyond the period available under Section 32 of the VAT Act and is consequently non est. Classification of goods - HELD THAT - What is required to be seen is whether carbon dioxide whether in liquid form or in gaseous form would fall under Heading No.2811. As submitted by the learned counsel for the petitioner the description of goods in Entry 100(190) of Schedule-IV is other inorganic acids and other inorganic oxygen compounds of non-metals and carbon dioxide definitely would fall within such a category. The fact that there are other products mentioned under the main Heading No.2811 would not mean that carbon dioxide does not fall within Heading No.2811. In any event Heading No.2811 21 specifically mentions carbon dioxide it may however be noted that there is no qualification that carbon dioxide should be in a gaseous form. In the absence of any such qualification carbon dioxide in gaseous form or liquid form would fall under HSN Heading No.2811 and also in Entry No.100(190) of Schedule-IV of the VAT Act. Conclusion - i) The order of revision is beyond the period available under Section 32 of the VAT Act and is consequently non est. ii) Carbon dioxide in gaseous form or liquid form would fall under HSN Heading No.2811 and also in Entry No.100(190) of Schedule-IV of the VAT Act. The order of revision requires to be set aside and is accordingly set aside - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

- Whether the revisional order passed by the Joint Commissioner (ST) revising the tax rate on liquid carbon dioxide from 5% to 14.5% was valid and sustainable.

- Whether liquid carbon dioxide falls within Entry-100(190) of Schedule-IV of the Andhra Pradesh VAT Act, 2005, attracting tax at 5%, or whether it falls under the unclassified goods category in Schedule-V, attracting tax at 14.5%.

- Whether the revisional order was passed within the limitation period prescribed under Section 32(3) of the VAT Act, taking into account the extension/exclusion of limitation granted by the Supreme Court during the COVID-19 pandemic.

- Whether the extension/exclusion of limitation for filing proceedings granted by the Supreme Court applies to statutory authorities passing revision orders under the VAT Act.

- Whether the requirement of obtaining a declaration from the purchaser of carbon dioxide to claim concessional tax rate under Entry-100(190) can be raised as a ground in the revision proceeding when not mentioned in the show cause notice or revisional order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and limitation of the revisional order under Section 32(3) of the VAT Act

Legal framework and precedents: Section 32(3) of the Andhra Pradesh VAT Act, 2005 prescribes a limitation period of four years from the date of service of the assessment order within which a revisional order can be passed. The Supreme Court, in Suo Motu WP (C) No. 3 of 2020, had passed orders dated 23.03.2020 and 10.01.2022 excluding the period from 15.03.2020 to 28.02.2022 for the purpose of limitation calculation, primarily to protect litigants from being time-barred due to COVID-19 lockdown restrictions.

Court's interpretation and reasoning: The petitioner argued that the revisional order dated 22.03.2024 was beyond the four-year limitation period, as the assessment order was dated 12.04.2018 and the limitation expired in 2022. The respondent relied on the Supreme Court's orders extending limitation during the pandemic, contending that the limitation period was accordingly extended.

The Court examined the Supreme Court judgment in S. Kasi vs. State through the Inspector of Police, which clarified that the extension/exclusion of limitation granted by the Supreme Court during the pandemic was intended solely for the benefit of litigants-persons seeking to file petitions, applications, suits, or appeals-and not for statutory authorities exercising powers under statutes. The Court noted that the rationale was to prevent hardship to litigants unable to physically approach courts or tribunals during lockdown, and did not intend to extend time limits for authorities to act under statutory provisions.

Supporting this interpretation, the Court referred to decisions of the Calcutta High Court in Gobindo Das & Ors. vs Union of India and Ors. and the Delhi High Court in Vikas WSP Ltd. vs. Directorate Enforcement, which held that the Supreme Court's extension of limitation does not apply to statutory authorities. The Telangana High Court's interlocutory order to similar effect was also noted.

Application of law to facts: Applying these principles, the Court held that the revisional order passed on 22.03.2024 was beyond the four-year limitation period prescribed under Section 32(3) of the VAT Act, without any valid extension applicable to the statutory authority. Hence, the revisional order was non est (void).

Treatment of competing arguments: The Court rejected the respondent's contention that the Supreme Court's extension applied to statutory authorities, relying on the authoritative Supreme Court ruling in S. Kasi and consistent High Court precedents.

Conclusion: The revisional order was barred by limitation and liable to be set aside on this ground alone.

Issue 2: Classification of liquid carbon dioxide under the VAT Act and applicable tax rate

Legal framework and precedents: The Andhra Pradesh VAT Act, 2005, provides different tax rates for goods classified under various schedules. Entry-100(190) of Schedule-IV covers "other inorganic acids and other inorganic oxygen compounds of non-metals" and attracts tax at 5%. Schedule-V covers unclassified goods, attracting tax at 14.5%. The classification depends on the HSN (Harmonized System of Nomenclature) code applicable to the goods.

Court's interpretation and reasoning: The petitioner contended that liquid carbon dioxide falls within Entry-100(190) of Schedule-IV, as carbon dioxide is an inorganic oxygen compound of a non-metal (carbon) and is covered under HSN Heading No. 2811, specifically subheading 28112190. The petitioner argued that there is no distinction in the VAT Act or HSN code as to whether carbon dioxide is in gaseous or liquid form, and thus liquid carbon dioxide should be taxed at 5%.

The respondent contended that liquid carbon dioxide does not fall within Entry-100(190) and should be treated as unclassified goods under Schedule-V, attracting 14.5% tax. The respondent relied on the classification under Chapter 28 of the ITC (Indian Tariff Code) but failed to demonstrate that liquid carbon dioxide was excluded from Heading 2811.

The Court analyzed the description of Entry-100(190) and the relevant HSN codes. It observed that the HSN code 28112190 explicitly includes carbon dioxide without any qualification limiting it to gaseous form. The Court held that the presence of other products under Heading 2811 does not exclude carbon dioxide. Therefore, liquid carbon dioxide falls within Entry-100(190) of Schedule-IV.

Application of law to facts: Since liquid carbon dioxide is covered under Entry-100(190), it is liable to tax at 5% and not at the higher rate of 14.5% applicable to unclassified goods.

Treatment of competing arguments: The Court rejected the respondent's classification on the ground that no clear exclusion of liquid carbon dioxide from Entry-100(190) was shown. The Court also noted that the respondent's reliance on the ITC Chapter 28 classification was insufficient to override the statutory schedule entries.

Conclusion: Liquid carbon dioxide is taxable at 5% under Entry-100(190) of Schedule-IV of the VAT Act.

Issue 3: Raising of new ground regarding declaration requirement for concessional tax

Legal framework and precedents: Amendments to the VAT Act introduced a requirement (Note-6 under Entry-100) that a declaration must be obtained from the purchaser to avail concessional tax rates. However, principles of natural justice and settled legal position hold that grounds not raised in the show cause notice or revisional order cannot be introduced later to sustain the order (citing Mohinder Singh Gill and Anr. vs. Chief Election Commissioner).

Court's interpretation and reasoning: The respondent raised in the counter affidavit that the petitioner should have obtained declarations from purchasers to claim the concessional rate. This ground was not mentioned in the show cause notice or revisional order.

Application of law to facts: The Court held that since this ground was not raised in the statutory proceedings, it cannot be invoked to defend the revisional order.

Conclusion: The new ground regarding declaration requirement is not admissible.

3. SIGNIFICANT HOLDINGS

- "The limitation, for filing petitions/applications/suits/ appeals/all other proceedings, was extended to obviate lawyers/litigants to come physically to file such proceedings in respective courts/tribunals. The order was passed to protect the litigants/lawyers whose petitions / applications/suits/ appeals/all other proceedings would become time-barred they being not able to physically come to file such proceedings. The order was for the benefit of the litigants who have to take remedy in law as per the applicable statute for a right. The law of limitation bars the remedy but not the right... The order dated 23-3-2020 cannot be read to mean that it ever intended to extend the period of filing charge-sheet by police as contemplated under Section 167 (2) Cr.PC." (Paraphrased from Supreme Court in S. Kasi)

- The extension/exclusion of limitation granted by the Supreme Court during the COVID-19 pandemic applies only to litigants seeking to file proceedings and not to statutory authorities exercising powers under statutes.

- Liquid carbon dioxide falls within Entry-100(190) of Schedule-IV of the VAT Act as an "other inorganic oxygen compound of non-metals" under HSN Heading No. 2811, taxable at 5%.

- Grounds not raised in the statutory show cause notice or revisional order cannot be introduced later to sustain or defend such orders.

- The revisional order passed beyond the prescribed limitation period under Section 32(3) of the VAT Act is invalid and liable to be set aside.