2022 (9) TMI 384 - HC - VAT and Sales Tax

Liability of tax - fibre optic jumper or fibre cable assemblies or fibre optic patch cords - liable to tax at 14.5 per cent. under section 4(1)(b)(iii) of the KVAT Act or not - HELD THAT - It would be open for the appellate authority to take a considered decision without reference to the clarification. However, in order to avoid multiplicity of litigations, it would not be out of place to point out that when the authority is considering the notification under the KVAT Act vis- a-vis entry under the Central Excise Tariff Act, it must keep in mind the explanation appended to the notification under the KVAT Act, viz., Explanations 1 to 4. The writ petition is disposed off.

Summary

Issues:
1. Quashing of clarification on tax liability for fibre optic products under KVAT Act
2. VAT and CET classification of fibre optic products
3. Previous court order and subsequent proceedings
4. Withdrawal of clarification and quashing of order

Analysis:

Issue 1: The petitioner sought the quashing of a clarification by the Commissioner of Commercial Taxes regarding the tax liability of fibre optic products under the KVAT Act. The clarification held that fibre optic jumpers, cable assemblies, and patch cords are subject to tax at 14.5%. The petitioner argued that these products are not covered under the relevant KVAT notification.

Issue 2: The VAT classification under Notification No. FD 116 CSL 2006 described optical fibre cables and networking cables, while the CET classification included insulated cables and optical fibre cables. The KVAT notification did not explicitly cover cables fitted with connectors, such as fibre optic jumpers, cable assemblies, and patch cords, leading to the application of a 14.5% tax rate under section 4(1)(b)(iii) of the KVAT Act.

Issue 3: The petitioner had previously approached the court seeking similar relief, which was remitted for fresh consideration by the Commissioner of Commercial Taxes. Despite the petitioner's attempt to withdraw the application, the Commissioner proceeded with the matter. The court intervened, quashing the clarification and emphasizing the need for a considered decision by the appellate authority without reference to the withdrawn clarification.

Issue 4: The court highlighted the importance of avoiding multiple litigations and directed the appellate authority to consider the KVAT notification in light of the Central Excise Tariff Act entries. The order set aside the clarification and kept all contentions open for future proceedings, ensuring a comprehensive resolution of the tax liability issue for the fibre optic products in question.