2022 (8) TMI 1088 - HC - VAT and Sales Tax

Nomenclature and classification of imported Spectrum Analyser - to be classified under the HSN Code Nos.9022.90.90, 9022.19.00, 9027.90.90 and 9033.30.90 or not - taxable at the rate of 5% tax or at 14.5%? - Department based its decision on the opinion from the Executive Engineer Electronics Division - denial of opportunity to the dealer/ petitioner while making assessment orders - HELD THAT - In matters involving classification, which would have an implication on the rate of tax applicable on the sale of the commodity, judicious and legal adjudication are expected and would be appreciated. Therefore, it is noticed that the orders in Exts.P15 and P16 have not recorded findings on the objections/reasons taken by the dealer. The writ petition, since is admitted, at this point of time, instead of directing the dealer to avail the remedy of appeal, where the very same ground, lack of proper consideration, would be urged; to avoid further delay, we are convinced to exercise our discretionary jurisdiction, set aside the orders in Exts.P15 and P16 and remit the matter to Assistant Commissioner for consideration and disposal afresh. On remand fresh assessment orders were made against Redlands Ashlyn Motors PLC dated 29.12.2018 and 01.01.2019. In the instant common order, we have considered the grounds raised against the said orders and have set aside the assessment orders, remitted the matter to the Assistant Commissioner for consideration and disposal afresh. The net effect of the above conclusion is that whether the classification issue pending before the Assistant Commissioner is present or not on the date when the common order was made by the Tribunal. The review of the order of remand in the batch of cases is not available since the issue of classification was pending before the Assistant Commissioner. The remand is justified and hence confirmed - Revision dismissed.

Issues Involved:
1. Classification and Tax Rate of Imported Commodity
2. Procedural Fairness in Assessment Orders
3. Validity of Remand Orders by Tribunal
4. Opportunity for Dealers to Present Evidence

Issue-wise Analysis:

1. Classification and Tax Rate of Imported Commodity:

The core issue revolves around the classification of a product imported by Redlands Ashlyn Motors PLC, claimed to be a Spectrum Analyser (EDXRF) - Model Redlands EDX 600, and its corresponding tax rate under the Kerala Value Added Tax Act, 2003 (KVAT Act). The Department classified the commodity as a Spectrometer and levied a tax rate of 14.5%, while the dealer argued for a 5% tax rate, asserting the product's classification under different HSN codes (9022.90.90, 9022.19.00, 9027.90.90, and 9033.30.90). The Assistant Commissioner's assessment was based on the premise that the HSN codes used for importation did not correspond to any schedule under the KVAT Act, thus defaulting to a 14.5% tax rate under Entry 103. The dealer contested this classification, citing an expert opinion from the Executive Engineer (PWD) Electronics Division, which suggested that the terms Spectrum Analyser and Spectrometer are interchangeable.

2. Procedural Fairness in Assessment Orders:

The petitioner challenged the assessment orders (Exts.P15 and P16) for being arbitrary and not adhering to the directions issued by the Deputy Commissioner (Appeals) and the High Court in previous proceedings. The Deputy Commissioner had earlier set aside the initial classification and directed a fresh assessment after proper enquiry. Despite obtaining an expert opinion, the Assistant Commissioner maintained the classification as Spectrometer without adequately considering the dealer's objections and the expert's report. This raised questions about procedural fairness and adherence to principles of natural justice.

3. Validity of Remand Orders by Tribunal:

The Tribunal had remanded the case for fresh consideration by the Assistant Commissioner, which the petitioner contested as unnecessary and avoidable. The Tribunal's decision was based on the fact that similar issues had been remanded in related cases involving the same commodity. The Tribunal dismissed the appeals filed by the dealer for the assessment years under the KVAT Act and CST Act, upholding the remand for fresh disposal.

4. Opportunity for Dealers to Present Evidence:

The High Court emphasized the need for a judicious and legal adjudication process, allowing the dealers to present material and evidence regarding the classification and function of the commodity. The Court set aside the assessment orders (Exts.P15 and P16) and remitted the matter to the Assistant Commissioner for fresh consideration. The Assistant Commissioner was directed to re-evaluate the classification and tax rate, taking into account the product details, commercial utility, HSN codes, and the expert opinion from the Electronics Division.

Conclusion:

The High Court remanded the matter to the Assistant Commissioner for fresh consideration, emphasizing procedural fairness and the need for a thorough examination of the classification issue. The dealers were granted the opportunity to present additional evidence, and the Assistant Commissioner was instructed to maintain consistency in procedure and opportunity while passing independent orders for the involved dealers. The remand by the Tribunal was upheld, and the O.T. Revisions filed by the petitioner were dismissed.

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