2013 (9) TMI 938 - HC - VAT and Sales Tax

Classification - Rate of Tax / VAT on while importing the diesel and Furnace oil within the territory of the State of Himachal Pradesh. - Rate of tax 7% or 2% (later 1%) - Validity of Entry 14 in Schedule II - Classification - Whether entry No. 14 in Schedule II, framed in exercise of powers under Sections 2 & 3 of the Act, was applicable Held that - in Schedule II, there is a specific entry covering import of diesel and Furnace oil and provides for tax at the rate of 7%. It is not possible to countenance the argument of the petitioner that inspite of that specific entry, the product/goods, imported by the petitioner, within the territory of the State of Himachal Pradesh, would be covered by entry No. 14, which, in our opinion, is a residuary entry. Entry No. 14 to schedule II vide Notification, issued on 22nd September, 2012 cannot be considered as new entry incorporated in Schedule II. However, the purport of the Notification is explanatory in nature, which is stating the obvious that product/goods, specifically covered by entry I in Schedule II, cannot be covered under residuary entry No. 14 - Decided against the assessee.

Summary

Issues:
1. Applicability of entry No. 14 in Schedule II to the petitioner importing diesel and Furnace oil.
2. Interpretation of the specific entry covering import of diesel and Furnace oil in Schedule II.
3. Classification of diesel and Furnace oil under residuary entry No. 14.
4. Impact of the Notification amending entry No. 14 in Schedule II.

Analysis:
The High Court of Himachal Pradesh deliberated on the applicability of entry No. 14 in Schedule II to a petitioner importing diesel and Furnace oil for its pharmaceutical industry. The petitioner contended that due to the industrial policy, it believed its tax liability would not exceed 2% or 1% based on subsequent notifications. However, the court found a specific entry in Schedule II imposing a 7% tax on diesel and Furnace oil imports, rejecting the petitioner's argument that these goods fall under the residuary entry No. 14. The court cited the principle that a specific entry prevails over a residuary entry, as established in previous judgments.

Furthermore, the petitioner argued that entry No. 14 applies to all industrial inputs except those listed in entry 9-b, including diesel and Furnace oil. However, the court referenced a communication from the Excise and Taxation Commissioner stating that diesel and Furnace oil do not qualify as raw materials and are subject to a 5% entry tax. The court noted a subsequent Notification amending entry No. 14, which clarified that goods covered by entry 1 cannot be classified under the residuary entry. The court interpreted this Notification as explanatory rather than introducing a new entry, affirming that the specific entry prevails over the residuary entry.

In conclusion, the court dismissed the petition, emphasizing that the petitioner's imports of diesel and Furnace oil are subject to the specific tax rates mentioned in Schedule II and cannot be categorized under the residuary entry No. 14. The court's decision was based on the established legal principle that a specific entry takes precedence over a residuary entry, as reinforced by the Notification amending entry No. 14.