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2016 (11) TMI 216 - HC - VAT and Sales TaxClassification of goods - tissue papers - Whether the tissue paper would be covered by Entry 57 Schedule C of the Haryana Value Added Tax Act, 2003, which is assessable at the rate of 4% or it is assessable under the Residue Entry at the rate of 12.5%? - user test need to be applied or not? - Held that - If the case of the appellant is considered in the light of enunciation of law, as referred to above, Entry 57 in Schedule C only prescribes paper , paper board and newsprint . It does not provide for any inclusions or exclusions. It further does not provide for any user test. The word paper used in the Entry is in generic form, which will include all types of paper, which has its essential characteristics. It is not in dispute that even the tissue paper, napkin, toilet paper rolls etc. retain the essential characteristics of paper. It is only that it is in different strength and is used for different purposes. There is no competing entry to find out whether product falls in entry A or B . The residuary entry is to be invoked in case, with liberal construction to the specific entry, the product could not be found to be forming part thereof - appeal allowed - decided against Revenue.
Issues Involved:
1. Whether tissue paper and its forms fall under Entry 57 of Schedule 'C' of the Haryana Value Added Tax Act, 2003, or should be classified under the Residue Entry. Detailed Analysis: Issue 1: Classification of Tissue Paper and Its Forms Arguments of the Appellant: The appellant, engaged in the manufacture and sale of tissue paper, napkin, toilet paper rolls, kitchen wipes, and facial tissues, argued that these products should be classified under Entry 57 of Schedule 'C' of the Haryana Value Added Tax Act, 2003, which is taxable at 4%. It was contended that the Financial Commissioner and Principal Secretary to the Government of Haryana, Excise & Taxation Department, erred in considering the end use of the products for classification purposes and in referring to the Central Excise Tariff. The appellant argued that the term 'paper' in Entry 57 is broad and does not specify any particular use, and thus, should include all forms of paper, including tissue paper. The appellant relied on various judgments, including those of the Kerala High Court and the Supreme Court, to support the argument that the end use is not a relevant factor for classification and that a liberal interpretation should be applied to include tissue paper under the term 'paper'. Arguments of the State: The State argued that the term 'paper' in Entry 57 should be understood to refer to paper used for writing, printing, drawing, packing, decorating, or as wallpaper. The products manufactured by the appellant, such as tissue paper and napkins, do not fall under these categories and should therefore be classified under the Residue Entry, taxable at 12.5%. The State relied on the Supreme Court's judgment in the case of M/s Kores (India) Ltd., which held that carbon paper is not 'paper' as understood in common parlance. The State also cited judgments from the Karnataka High Court and other courts to support the argument that tissue paper should not be classified under the term 'paper'. Discussion: The court noted that the term 'paper' in Entry 57 of Schedule 'C' is used in a generic form and does not specify any inclusions or exclusions. The court referred to various judgments, including those of the Supreme Court, which emphasized that the end use of a product is not a determinative factor for classification unless explicitly mentioned in the entry. The court also highlighted that the word 'paper' in the entry should be given its broad and purposive meaning, which includes all types of paper retaining its essential characteristics, regardless of the specific use. Case Law: The court referred to several judgments to support its reasoning. In Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh, the Supreme Court opined that the 'user test' has limitations and the particular use of an article by a special consumer is not determinative of the nature of the goods. In Commnr. of Central Excise, Cochin v. M/s Mannampalakkal Rubber Latex Works, the Supreme Court emphasized the importance of the 'composition test' over the 'end-user test' for classification purposes. The court also cited the judgment in M/s A. R. Thermosets (Pvt.) Ltd., where bitumen emulsion was classified under the entry for bitumen, as it retained the essential characteristics of bitumen. Conclusion: The court concluded that the term 'paper' in Entry 57 of Schedule 'C' includes all types of paper, including tissue paper, napkin, toilet paper rolls, kitchen wipes, and facial tissues, as they retain the essential characteristics of paper. The court held that there is no competing entry to classify these products under a different category and that the residuary entry should only be invoked if the specific entry cannot cover the products with a liberal construction. Therefore, the court answered the substantial question of law in favor of the appellant and against the revenue, classifying the products under Entry 57 of Schedule 'C' taxable at 4%. Disposition: The appeal was disposed of accordingly.
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