2016 (3) TMI 332 - SC - VAT and Sales Tax

Rate of sales tax / VAT on roofing tiles as well as decorative roofing tiles. - classification - AO was of the opinion that the item in question would not be treated as roofing tiles , but comes within the description of other tiles - Held that - Once determination is held in favour of the assessee, no further inquiry which is not germane to the issue would be permissible. We are , thus, of the opinion that the goods manufactured by the appellant are covered by sub-entry (iii) of Entry 8 Part T of the Second Schedule on which only 5% sales tax is payable and not 15% as held by the authorities below. - Decided in favor of assessee.

Summary

Issues:
Interpretation of tax entry for roofing tiles under the Karnataka Sales Tax Act for the Assessment Year 1993-94.

Analysis:
The appellant, a manufacturer of bricks and tiles, filed its sales tax return for the relevant year, claiming a 5% duty on roofing tiles under Entry 8(iii) of the Second Schedule to the Act. However, the Assessing Officer levied a 15% tax, considering the tiles as "other tiles" under sub-entry (iv) of Entry 8. The High Court upheld this decision, leading to the appellant's appeal.

To resolve the controversy, the Supreme Court analyzed Entry 8 of the Second Schedule, specifically focusing on sub-entries (i), (ii), and (iii) related to different types of tiles with varying tax rates. The Court noted that roofing tiles, excluding country tiles, fall under sub-entry (iii) attracting a 5% duty. The Court emphasized that if the goods manufactured by the appellant are roofing tiles falling under this sub-entry, they should be taxed at 5%.

The Court examined the manufacturing process and differences between roofing tiles and decorative tiles presented by the appellant. The Joint Commissioner's order highlighted the distinctions, emphasizing that the appellant's products were roofing tiles made of ordinary clay, not decorative tiles. Despite this, the High Court excluded the tiles from sub-entry (iii) based on irrelevant considerations, such as the existence of separate account books for roofing and decorative tiles.

The Supreme Court criticized the High Court's reasoning, emphasizing that the crucial factor is whether the tiles fall within the description of sub-entry (iii), which had been established in favor of the appellant by relevant authorities. The Court rejected the High Court's logic regarding tax rates and common man usage, asserting that the focus should be on the statutory description. Consequently, the Court allowed the appeal, setting aside the High Court's judgment and confirming that the appellant's tiles are covered by sub-entry (iii) with a 5% tax liability, not 15% as previously determined.