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TMI Blog2011 (3) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... in less than one percent and that the balance 99 percent was water - There being no estoppel against law, the plea of the respondents against the maintainability of the instant proceeding for want of bonafide of the petitioner does not commend for acceptance The argument on behalf of the respondents that Ujala Supreme even if a dye, being offered for sale in form or packing for retail sale, is covered by heading 3212 is not based on pleadings - As Ujala Supreme is a highly diluted form of AVP in its essential character, on the application of Rule 3(b) it appropriately is entitled to be catalogued in Entry 114 of Schedule II-C of the Act and qualified for HSN 3204 12 94 for determining the rate of taxability - Held that: petitioner‟s product "Ujala Supreme" is entitled to be included in Entry 114 of Schedule II-C of the Act with corresponding rate of duty prescribed by HSN Code No. 3204 12 94 - Decided in favor of the assessee - W P ( C) NO.5428/2010 - - - Dated:- 15-3-2011 - HON BLE MR JUSTICE AMITAVA ROY PETITIONER :Mr M.P.Debnath, Mr B Sharma, Ms J.Huda, Advocates. RESPONDENTS: Mr D.Saikia, Standing counsel, JUDGMENT AND ORDER(CAV) The petitioner b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner afresh by determining the tax payable by it for Ujala @ 4%. The revenue filed a revision petition against this order before the Commissioner of Taxes, Assam. The revisional authority by his order dated 27.6.08 sustained the findings of the appellate authority i.e. Deputy Commissioner of Commercial Taxes (Appeals), Guwahati concluding that Ujala occasioned by adding of water with AVP did not amount to manufacture and that the product retained its original characteristics. 5 The Additional Deputy Commissioner of Taxes, Assam subsequent thereto, by his letter dated 26.5.2010 required the petitioner to appear before the Commissioner of Taxes, Assam, for clarification regarding rate of tax on Ujala Supreme. The petitioner arranged for its representation through its authorized representative and furnished all materials relevant to the issue and also reinforced the same with written submission. The impugned order dated 11.8.2010 followed. 6. This order inter alia discloses that the exercise had been undertaken afresh pursuant to a petition structured on the decision rendered on 6.4.2009 by the Kerala High Court in M.P. Agencies vs. State of Kerala, (2010) 28 VST 44 (KE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se may be, inn common parlance or commercial parlance. While interpreting a commodity, if any inconsistency is observed between the meaning of a commodity without HSN Number and the meaning of a commodity with HSN Number, the commodity should be interpreted by including it in that entry which is having the HSN Number. . . . . .... .. . . 43. The goods given in List A to third Schedule as Industrial inputs and Packing Materials‟ shall attract the rate of tax applicable to third schedule regardless to the purpose for which such goods have been purchased. 8. According to the petitioner, its product Ujala Supreme‟ is the diluted form of Acid Violate Paste and is classifiable under HSN Code 3204 12 94 of the Central Excise Tariff Act,1985 ( for short, hereafter referred to as the Tariff Act ) as well as the Customs Tariff Act,1975. As the product has no other ingredient, it remains a dye as Acid Violate Paste though in a much diluted form. Referring to various test reports and experiments the petitioner while contending that its product is not a fabric whitener ,has controverted as well, the findings of the Kerala High Court in M.P.Agencies(Supra) on which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it (Ujala). The respondents maintained that the findings of the Kerala High Court in M.P. Agencies (Supra) were of decisive significance and that no different approach in the instant proceeding is warranted. 10. Mr Debnath, in his pursuit to invalidate the impugned order of the revenue authority has emphatically questioned the tenability of the findings recorded in the decision of the Kerala High Court in M.P.Agencies(Supra). According to him, the conclusion that Ujala Supreme was in the nature of laundry whitener and thus was not classifiable under the third Schedule of the Kerala VAT Act against the HSN Code No.3204 12 94 ( i.e. Acid Violate Paste)was contrary to Rule 43 of the Rules of Interpretation and in absence of any stipulation in the said enactment or its Schedule and Rules framed thereunder that the classification of the goods with reference to HSN Code would be available only for the original product, the observation to the contrary made in the judgment was not sustainable. Mr Debnath urged that as the AVP and the Ujala Supreme are products which are clearly classifiable in the third Schedule to the Kerala VAT Act, the latter could not have been brought under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Assam Industrial Policy, Assam General Sales Tax Act, 1993 and the Act is not identical in all essential constituents to render the challenge herein frivolous. Mr Debnath placed reliance on the following decisions of the Apex Court : 1) (1976) 2 SCC 241,Dunlop India Ltd. vs. Union of India and Others. 2) 1994(72) ELT 669, Jyoti Laboratories Vs. CCE, Cochin. 3) 2002 (142) ELT 18, Collector of Customs, Bomday vs. Business Forces Ltd THR.OL. 4) 2007(78) RLT 276(T), Jyothi Laboratories Ltd. Nnr. Vs. CCE, Calicut. 5) 2007(82) RLT 927(S.C), CCE, Mumbai vs. Laijee Goodhoo Co. 6) 2007(210) ELT 171(S.C), Crane Betel Nut Powder Works vs. Commissioner of Customs Central Excixe, Tirupathi. 7) 2007(217) ELT 161(SC), CCE, Cochin vs. Mannampalakkal Rubber Latex Works . ` 8) [2008 15 VST 10(SC)]Reckitt Benckiser (India) Ltd. vs. Commissioner of Commercial Taxes and Others. 11. The learned Standing Counsel for the Revenue has responded at the out-set by questioning the bonafide of the challenge contending that the petitioners having availed sales tax concession under the Industrial Concession Scheme by representing the product to be one manufactured by applying r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cking for retail sale, it is beyond the tariff item 3204 and instead traceable to tariff item 3212 of Chapter 32 of the Tariff Act an thus liable to be taxed @ 13.2 % under Schedule-V of the Act. Ujala being essentially a laundry whitener or a fabric whitener, it is not a classified item under the Tarrif Act with an allotted HSN No. and is thus exigible to tax as a residuary item under Schedule-V of the Act, he insisted. He emphatically rebutted the shortcomings in the determination in M.P.Agencies(Supra) as provided by the petitioner. Mr Saikia, to bolster his contentions placed reliance on the following decisions of the Apex Court- i) (2005) 2 SCC 460 ; OK Play India Ltd vs. Commissioner of Central Excise Delhi III. ii) (2005) 12 SCC 731; Western India Plywood Ltd vs. Collector of Customs. iii) (2007) 7 SCC 490; Commissioner of Central Excise Mumbai vs. Damnet Chemicals Pvt. Ltd. iv) (2007) 12 SCC 602; Mercantile Company vs. Commissioner of Central Excise, Calcutta. v) (2008) 9 SCC 82 ; Camlin Limited vs. Commissioner of Central Excise, Mumbai. 12. Mr Debnath, in his short reply maintained that in the facts of the case, Item 3212 of Chapter 32 of the Tariff Act had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the description against any heading or sub- Heading is shown as other then the interpretation as Provided in Note 2 shall apply. Central Excise Tariff of India Chapter 32 ` Tanning or Dyeing Extracts; tannins and their Derivatives; Dyes, Pigments and other colouring matter; paints and varnishes‟ putty and other mastics; inks . 3204 Synthetic organic colouring matter, whether or not chemically defined; preparations as specified in note 3 to this Chapter based on synthetic organic colouring matter; synthetic organic products of a kind used as fluorescent brightening agents or luminophores, whether or not chemically defined. 3204 12 94 Acid Violates, 14. 14. A global body/entity nomenclatured as World Customs Organization (earlier named Customs Co-operation Council) was established by a Convention signed in Brusseels on 15h December,1950 delineating its functions amongst others to make recommendations to ensure an uniform interpretation and application of the Conventions concerning the Nomenclature for the Classification of Goods in Customs Tariffs and the Valuation of Goods for Customs Purposes. In order to secure an uniform classification of commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute. The relevant entries in the Act and the Tariff Act are also in place. There is no dissensus in the Bar, that the Rules for the Interpretation of Harmonized System as well for the Schedules figuring in the KVAT have a decisive bearing on the course of the present adjudication. The impugned order dated 11.8.2010 of the Commissioner of Taxes, Assam under section 105 of the Act is wholly structured on the determination in M/S M.P. Agencies(Supra) by the Kerala High Court involving the same product. Having regard to the aforesaid conclusive impact of this decision on the impugned order, it would logically be expedient to notice at this stage the findings recorded therein. That the rival contentions are pre-dominantly founded on the conclusions recorded therein also endorse this step. 16. The contextual facts in M/s M.P. Agencies (Supra) reveal that two products of the petitioner herein namely, Ujala Supreme‟ and Ujala Stiff and Shine‟ were involved. The factual recitation reveals that Ujala Supreme is produced by the petitioner in bottles describing it to be a fabric whitener. It was identified by the jurisdictional Commissioner of Commercial Taxes as a laundry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial parlance test thus was rejected. The same reasonings figure in the order impugned herein. 18. Before adverting to the merit of the contentious projections, the respondents‟ cavil on the petitioner‟s bonafide demands attention. The petitioner does not deny to have availed the benefit of tax/ fiscal incentives under the Assam Industrial Policy,2003 at the relevant point of time. The policy was formulated amongst others to ensure industrial development in the industrially backward regions of the State and to generate more employment opportunities. It offered a package of incentives for promotion and setting up of industrial units and revilalization of sick industrial units and to promote investment in the State. The eligibility criteria for availing the incentives offered thereunder visibly envisaged a date of commencement of commercial production of the unit concerned whether existing or new and a finished product was contemplated to mean and include the item manufactured by the eligible units . Raw materials similarly were envisaged to mean and include all industrial components, intermediate goods, substances, consumable stores including furnace oil and light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against a tariff item mentioned in the Third Schedule of KVAT then, in terms of the Rules of Interpretation one ought to abide by the same as adopted by Customs Tariff Act, 1975 and thus interpret the entries in the said Schedule not only in the light of the entries in the Custom Tariff Act,1975, but also the judgments applicable thereto. Their Lordships observed that KVAT was aligned with the Customs Tariff which, in turn, was in Harmony with HSN and consequently its product in question was required to be viewed in the context of HSN and Code number and the judgmenst based thereon. 20. That Explanatory Notes to the Harmonized System of Nomenclature (HSN) were not only of persuasive value, but having regard to the fact that the structure of the Central Excise Tariff is based thereon were entitled to greater weightage was underlined by the Apex Court in Collector of Customs, Bombay(Supra) in which it quoted with approval its observations in Collector, Central Excise, Shillong vs. Wood Crafts Products Limited [ 1995(77) E.L.T. 23] as follows :- We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n extremely diluted form of AVP in the compositional context is also a finding of the Kerala High Court in M/S M.P. Agencies( Supra). 23. The following excerpt of the certificate dated 30.8.2006 of Prof. V.R. Kanetkar, Professor and Head, Dyestuff Technology Department, University of Mumbai, Institute of Chemical Technology (Autonomous) , University of Mumbai deserves to be extracted. The acid violate paste (referred as AVP hereafter) supplied to us confirms to Acid Violate 49, a synthetic organic classified into acid dye class which is used for the colouration of silk wool at elevated temperatures in the presence of acid. AVP is uniform and having standard strength which is formulated and prepared as ready for use. The AVP as well as Ujala purchased from the market are subjected to instrumental analysis (High Performance Thin Layer Chromatography) that the result are observed as below. 1. The chemical composition of AVP and Ujala are the same except for the dilution in Ujala . 2. It can be observed from the chromatogram that Ujala is a heavily diluted form of AVP with water. 3. As such Ujala cannot be used as a dye or a colouring matter as it is. 4. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (existence and authenticity of the report dated 22.10.07 not having been denied by the respondents), the absence of dyeing efficacy of the petitioner‟s product in absolute terms cannot be inferred. Ujala Supreme assuredly thus is a commodity which is AVP being highly diluted with water possessing dyeing quality in the presence of acid at elevated temperature. 26. Axiomatically, therefore, if Ujala is identifiable with AVP though in a diluted form and is not construed to be a commercially different product therefrom, it is classifiable under Entry 114 of the Act and relatable to HSN Number 3204 12 94 for the purpose of excise duty under the Tariff Act. It, however, it is regarded as a new product independent of its constituent AVP irrespective of its end use , in absence of any other entry available to accommodate it, it is liable to be assessed as a residuary item contemplated under Schedule V of the Act. Admittedly, Ujala Supreme is a mixture or combination of AVP and water. Entry 114 of the Schedule II C of the Act is assigned inter alia to synthetic organic colouring matter whether or not chemically defined as well as preparation based on synthetic organic colourin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve name, character or use. It was held that the process involved in the emergence of sweetened betel-nut pieces did not result in the manufacture of a new product as the end product continued to retain its original character though in a modified form. 29. The assessee in Commissioner of C.Ex. ,Cochin (Supra) engaged in the manufacture of Latex(Rubber) based Adhesive with brand names Superset(LC) and Superset (LB) , was engaged in a debate with the Revenue regarding classification of its product for determining its excise duty liability. Disapproving the plea of end user test‟ applied by the Revenue for the purpose of classification, their Lordships held that therefor composition test is important and that the end user test would apply only if relevant entry approves the same. 30. Noticeably, the argument on behalf of the respondents that Ujala Supreme even if a dye, being offered for sale in form or packing for retail sale, is covered by heading 3212 is not based on pleadings. Such a plea is instead opposed to the stance of the respondents that the product is shorn of any dyeing attribute. Be that as it may, as the product is a composition of two constituents as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on the former for the purpose of classification of goods is not permissible, does not advance the case of the revenue in the facts of the present case. 33. The decision in O.K. Play(India) Ltd.(Supra), while reiterating that the scheme of the Central Excise Tariff is based on Harmonised System of Nomenclature and the explanatory notes thereto as a safe guard for interpretation of an entry, underlined that functional utility, design, shape and predominant use are equally relevant for determining the classification of an item. This, however, is not in effacement of the enunciation that end use of product is not an absolute index in the matter of classification. 34. Their Lordships of the Apex Court in Western India Plywood Ltd(Supra) reiterated the well settled proposition that resort to residuary tariff entry ought to be made with a good deal of caution and only when no other provision express or implied is available for the goods in question. It was held that in the matter of classification, identification of an entry is the primary step and the description thereof would be relevant for assigning it a particular tariff entry. 35. The decision in Commissioner of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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