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2017 (10) TMI 885 - HC - VAT and Sales TaxTaxability - burnt coal - UPVAT Act - in the process of manufacturing paper and at the end of the manufacturing operation a residue of coal is left over which is then sold by the revisionist - classification of the residual item - taxable at 4% or 10%? - Held that - the Department does not rest its decision on any evidence which may have established that the residual commodity had lost all its combustible properties. It is pertinent to note that it was the Department which was proceeding to reject the stand taken by the assessee that coal dust was not liable to be taxed at the rate of 4%. While it is true that the principles of res judicata may not strictly apply to taxation assessments, insofar as generic issues inter partes are concerned, they must bind. In issues of classification, the Department cannot be permitted to vacillate unless there be new material and evidence which may justify or warrant a change in stance. Revision allowed - decided in favor of assessee.
Issues Involved:
1. Taxability of burnt coal under the U.P. Value Added Tax Act 2008. 2. Classification of the residual article as "coal dust" or "unclassified" for tax purposes. 3. Application of previous court decisions on the classification and taxability of similar commodities. 4. Consistency in the Department’s stance on the classification of the residual article over different assessment years. Detailed Analysis: 1. Taxability of Burnt Coal: The primary issue in these revisions is the taxability of burnt coal under the U.P. Value Added Tax Act 2008. The revisionist, engaged in the manufacture of paper, uses various fuels including coal. The residual coal left after the manufacturing process is sold by the revisionist. Initially, this residual article was taxed at 4% under the entry "coal including coke in all its forms." However, from Assessment Year 2002-03, the Department reclassified this residual article as "unclassified," thereby taxing it at 10%. 2. Classification of the Residual Article: The Tribunal classified the product as coal dust, thus treating it as an unclassified item and taxing it at 10%. The Department’s stance shifted based on two decisions: Commissioner of Sales Tax Vs. Modi Spinning & Weaving Mills and Commissioner of Sales Tax Vs. British India Corporation Limited. The revisionist argued that coal dust should be taxed at 4%, as previously accepted by the Department. The revisionist also provided certification indicating that the residual article retains combustible properties, similar to coal. 3. Application of Previous Court Decisions: The revisionist’s counsel cited the decision in British India Corporation, where coal dust was classified under the entry relating to coal, distinct from coal ash. The counsel also referenced Modi Spinning, arguing that the decision pertained to coal cinder and not coal dust. The counsel further cited Mahabir Singh Ram Babu Vs. Assistant Sales Tax Officer, which dealt with cinder and emphasized that commodities should be understood based on their intrinsic nature and commercial use, as upheld by the Supreme Court in CST MP Vs. Jaswant Singh Charan Singh. 4. Consistency in the Department’s Stance: The revisionist highlighted that the Department had consistently treated the residual article as coal in partially burnt form in previous assessment years, taxing it at 4%. The Department’s change in stance lacked new material evidence to justify the reclassification. The Supreme Court’s observations in Bharat Sanchar Nigam Ltd. Vs. Union of India were invoked, stressing that earlier pronouncements should generally be adopted unless new grounds or material changes justify a different view. Conclusion: The Court found that the residual article, classified as coal dust, retains combustible properties and should be taxed under the entry "coal including coke in all its forms" at 4%. The Tribunal’s orders were set aside, and the revisions were allowed with all consequential benefits to the assessee. The Court emphasized the importance of consistency in tax classification and the binding nature of previous decisions unless justified by new evidence.
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