Bombay High Court
The Commissioner Of Sales Tax vs M/S.Dev Enterprises Limited on 24 June, 2011
Author: D.Y.Chandrachud
Bench: D.Y.Chandrachud, Anoop V. Mohta
VBC 1 stsa23.10-24.6
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
SALES TAX APPEAL NO.23 OF 2010
IN
VAT APPEAL NO.10 OF 2008
The Commissioner of Sales Tax. ...Appellant.
Vs.
M/s.Dev Enterprises Limited. ...Respondent.
....
Mr.B.B.Sharma, AGP for the Appellant.
Mr.Praful C.Joshi for the Respondent.
.....
CORAM : DR.D.Y.CHANDRACHUD AND
ANOOP V. MOHTA, JJ.
June 24, 2011.
JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) :
This appeal by the Commissioner of Sales Tax has been admitted on the following substantial questions of law :
(i) Whether in the facts and in the circumstances of the case, the Tribunal was justified in construing the Schedule Entry C-74 to mean footwear predominantly made of plastic and not as footwear exclusively/entirely made of plastic; and
(ii)Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the goods of the respondent namely "Escort 111 SYN Black"
sold through invoice dated 25-08/2005" though admittedly not wholly made of plastic would be covered by the Schedule Entry C-74.::: Downloaded on - 09/06/2013 17:23:52 :::
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2. The Respondent engages in the business of the import and sale of footwear at Pune and is registered under the Maharashtra Value Added Tax Act, 2002. An application was submitted on 25 December 2007 to the Commissioner for a determination under Section 56 of the Act, accompanied by a Tax Invoice1 for a product described as Escort 111 SYN Black. The contention of the Respondent was that the product manufactured by it is plastic moulded footwear and is covered by Entry C-74 of the Schedule so as to attract a taxable rate of four per cent. Entry C-74 at the material time was as follows :
"C-74 Plastic Footwear 4% 1.4.2005 to 30.4.2005
C-74 Plastic footwear 4% 1.5.2005 onwards
(moulded);
hawaii chappals and
straps thereof"
3. The Commissioner by his determination dated 11 February 2008 held that in order to fall for classification under Entry C-74, a product must satisfy two criteria: (i) The product should be moulded; and (ii) The product should be made entirely 1 Invoice No.1130 dated 25 August 2005 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 3 stsa23.10-24.6 of plastic. Upon examining the process of manufacture, the Commissioner came to the conclusion that the product in question is made by applying a Direct Injection Process and is hence, moulded footwear. The first criterion was held to be satisfied. On the second criterion, it is an admitted position that the shoe upper is made of plastic coated fabric while the sole is made of PVC (plastic). The contention of the Respondent was that the footwear is predominantly made of plastic and hence, should be classified as plastic footwear under Entry C-74. The Respondent relied upon certificates of the Footwear Design and Development Institute of the Ministry of Commerce and Industries in the Government of India. The Commissioner considered the certificates which stated that in the sample, the visible portion is plastic; the upper material is plastic coated fabric, the sole is PVC (plastic) and hence, the footwear was sought to be classified as plastic footwear with a direct injected sole. The Commissioner was of the view that according to the certificate, the upper portion is plastic coated and is not itself plastic. A layer of cloth is coated with plastic, while the sole is the only part which is purely plastic as it is made from plastic granules. Hence, it was held that the product does not fall ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 4 stsa23.10-24.6 within the meaning of the expression "plastic footwear" as it is not purely a plastic product. The upper part is made out of hand cut and stitched plastic coated fabric and thus only the lower part is made out of moulded plastic. The Commissioner relied upon the judgment of the Karnataka High Court in Preston India Private Limited vs. State of Karnataka.2 Consequently, The Commissioner held that the product was not covered by Entry C-74, but by residual Entry E-1 and was hence liable to tax at 12.5%.
4. The decision of the Commissioner was challenged by the Respondent in appeal before the Tribunal. The Tribunal by its judgment dated 16 January 2010 held that the footwear was plastic footwear as it was predominantly made of plastic and was, therefore, covered by Entry C-74. The Tribunal noted that "it is true that .. footwear is not made entirely of plastic because other materials like fabric are also used therein". The Tribunal noted that "man made fabric with plastic coating is certainly used on the upper portion so as to make the footwear comfortable". However,
2 (2007) 35 MTJ 139 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 5 stsa23.10-24.6 on the basis of the certificate of the FDDI, the Tribunal accepted the contention of the Respondent that both in terms of weight as well as value, 90% of the material used in the manufacture of the footwear is plastic and hence, the footwear is made primarily of plastic.
5. On behalf of the Appellant, it has been submitted that (i) Entries in the Schedule must be construed according to their plain and literal meaning unless there is an ambiguity or an absurd result would ensue; (ii) Entry C-74 refers to plastic footwear. If the footwear is not of plastic, but is mixed with any other material, it cannot be termed as plastic footwear within the meaning of Entry C-74; (iii) It is an admitted position that the shoe upper is made of fabric coated with plastic, while the sole is made out of plastic.
The Respondent contended that the footwear in question, is plastic footwear because it is predominantly made out of plastic and relied upon certificates/reports of the manufacture of the footwear from the Footwear Design and Development Institute to the effect that it is plastic footwear. Those certificates have certified the product as plastic footwear only and with specific reference to the definition ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 6 stsa23.10-24.6 contained in Note-3 of Section XII of Chapter 64 to the Central Excise Tariff; (iv) The scheme of the Central Excise Tariff and Customs Tariff is based on the International Harmonized System of Nomenclature (HSN) and the explanatory notes thereto. The MVAT Act has not adopted HSN as a basis for classification of goods for the purposes of sales tax. The description contained in the Central Excise and Customs Tariff is confined to that legislation only and cannot be used for the purposes of the MVAT Act; (v) The description of footwear under the Excise Tariff Act is completely different from that under the MVAT Act. HSN Entry 6401 00 00 under Section XII, Chapter 64 reads as follows:
"Waterproof footwear with outer soles and uppers of rubber or of plastics, the uppers of which are neither fixed to the sole nor assembled by stitching, riveting, nailing, screwing, plugging or similar process."
Moreover, Note 3 to the Chapter expressly states thus:
"For the purposes of this chapter: (a) the terms "rubber"
and "plastics" include woven fabrics or other textile products with an external layer of rubber or plastic being visible to the naked eye; for the purpose of this provision, no account being taken of accessories or reinforcements."
But for the express definition of the expression "plastic" in Note-3 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 7 stsa23.10-24.6 so as to include woven fabric with an external layer of plastic in its definition, footwear could not be certified as plastic footwear unless it is made entirely out of plastic. These distinguishing features are absent in the case of the MVAT Act and its entry; (iv) For the purposes of Sales Tax Legislation, the State has not followed HSN in respect of the entries to the Schedule of the MVAT Act. Wherever, the State desired that the HSN classification is to be adopted, it has by a specific notification adopted the same in respect of a specific scheduled entry. Reliance has been placed on notifications pertaining to Entry C-6 (Notification dated 1 June 2005), C-54 (Notification dated 1 September 2005), and Entry C-56 (Notification dated 17 October 2005); (vii) The Karnataka High Court in its decision in Preston India Pvt. Ltd. considered the very entry (plastic footwear) appearing in the VAT legislation of that State. The Karnataka High Court held that since the material used for the upper portion of the footwear is man made fabric with plastic coating, the footwear would not fall for classification as plastic footwear; (viii) In the market, footwear made wholly of plastic is widely available for sale and which alone would be covered by Entry C-74; (ix) The Tribunal found, as a matter of fact, ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 8 stsa23.10-24.6 that the footwear in question, is not made entirely of plastic because other material like fabric is also used. The Tribunal, however, incorrectly applied the test of predominance in the present case; (x) The judgment of the Supreme Court in A.Nagaraju Bros. vs. State of Andhra Pradesh,3 is distinguishable. In that case, for the very dealer in issue, suitcases had been held to be plastic articles in the following Assessment Year 1983-84, but the Tribunal had taken a different view for Assessment Year 1981-82. The judgment of the Supreme Court does not lay down that the test of predominance should be applied for classification in all cases and is authority for the proposition that no single or universal test can be applied.
6. On the other hand, it has been submitted on behalf of the Respondent that (i) The Respondent and other traders similarly situate had submitted their sales tax returns periodically by making payment of tax at four per cent right since 1 April 2005. None of the authorities had raised objections till a survey was conducted in 2007; (ii) Entry C-74 does not postulate that the footwear should 3 (1994)95 STC 1 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 9 stsa23.10-24.6 be made purely of plastic; (iii) The entry in question is "plastic footwear" as distinct from "plastic footwear fully made of plastic".
In Karnataka for the purposes of VAT Legislation, the entry was specifically amended after 1 April 2006 to read "moulded plastic footwear fully made of plastic". No such amendment has been made in the State of Maharashtra. In the absence of specific mention, the entry needs to be interpreted so as to include a product which is predominantly and primarily made from the particular input material; (iv) In the Central Excise Tariff, Note-3 to Chapter 64 mentions that the terms "rubber" and "plastic"
include woven fabrics or other textile products with an external layer of rubber or plastic being visible to the naked eye. The Excise Department also allows the inclusion of woven fabric or other textile products in plastic footwear. The Footwear Design and Development Institute of the Union Ministry of Commerce and the Institute of Chemical Technology supported the Respondent on the basis of Note-3 of Chapter 64 to the Central Excise Tariff; (v) The Revenue did not produce any material in rebuttal to the material brought on record by the Respondent to establish that the item in question is not covered by Entry C-74. A resort to the residuary ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 10 stsa23.10-24.6 entry was not warranted since the residual entry can be applied only as a matter of last resort, once it is concluded that a specific entry in the Schedule is not attracted; (vi) Entries under the Central Excise Tariff Act unless adopted or referred to in the Schedule appended to the Maharashtra Value Added Tax Act, cannot be blindly applied for considering the scope and meaning of the entries under the Maharashtra VAT Act; (vi) There is no material on record to indicate that the product in dispute is commercially known in the trade as anything other than the plastic footwear. The benefit must, in the circumstances, go to the tax payers. The ingredients, nature and contents of the product have a vital role in determination of proper classification.
7. These submissions fall for consideration.
8. In analysing the merits of the rival contentions, the admitted position on which there is no dispute, is that (i) The footwear which forms the subject matter of the determination is not made entirely of plastic; and (ii) Other material namely, man made fabric with a plastic coating is used on the upper portion of ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 11 stsa23.10-24.6 the footwear. As a matter of fact, the documents which were produced by the Respondent before the Commissioner of Sales Tax, make it abundantly clear that while the sole of the footwear is made of PVC compound, the upper portion is made out of plastic coated textile where textile material is used as the base in order to avoid direct contact with the skin. For instance, one such certificate dated 15 March 2009 in respect of a sample of the footwear - Escort 111 SYN Black - states that the insole is made up "of top with cotton fabric and base of plastic" whereby a weight of 10% to 15% is attributable to cotton and 85% to 90% to plastic.
On this basis, it has been estimated that by weight and by value about 90% of the material is plastic, while 10% consists of other materials. The FDDI in its certificate dated 15 June 2009 states that the weight of elastic, thread, knitted fabric, sponge material etc., other than the PVC, is less than 10%. Several certificates of the Footwear Design and Development Institute of the Union Ministry of Commerce were relied upon. Those certificates which have also been produced during the course of these proceedings in a compilation state that Section XII of Chapter 64, Note-3 (of the Central Excise Tariff) defines the term "rubber and plastic" to ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 12 stsa23.10-24.6 include woven fabric or other textile products with an external layer of rubber or plastics being visible to the naked eye. It is on this basis that it has been concluded that the footwear can be identified as plastic footwear which is covered by the Central Excise Tariff 6402.19.
9. The question as to whether the footwear in question falls for classification as plastic footwear cannot be determined on an a priori reading of the notes annexed to Section XII of Chapter 64 to the Central Excise Tariff. Note 3 to Chapter 64 clarifies that for the purposes of the Chapter, the term "rubber and Plastics" includes woven fabric or other textile products with an external layer of rubber or plastics being visible to the naked eye. Similarly, Note 4 clarifies that subject to Note 3, the material of the upper shall be taken to be the constituent material having the greatest external surface area, no account being taken of accessories or reinforcements. Note 3 gives an extended meaning to the expression 'plastic' by bringing in woven fabrics or textile material with an external layer of plastic. That is only for the purposes of that Chapter in the Central Excise Tariff. The interpretation of an ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 13 stsa23.10-24.6 entry to the Maharashtra Value Added Tax Act cannot be based either on the scheme of the Central Excise Tariff or Harmonized System of Nomenclature and the explanatory notes thereto.
Evidently, an explanation such as Note 3 to Chapter 64 of Section XII of the Central Excise Tariff Act has not been adopted in the value added tax legislation in the State of Maharashtra. But Note 3 of Chapter 64, Section XII of the Central Excise Tariff was the basis and foundation on which the Respondent, relying on the FDDI certificate sought to clarify its product as plastic footwear.
This is plainly contrary to law. It is evident from the material that was produced by the Respondent, principally the certificates issued by the FDDI that a substantial part of that material is founded on the notes appended to Section XII of Chapter 64 of the Central Excise Tariff Act. The basis on which the Respondent sought an inference to be drawn that the footwear fell for classification as plastic footwear was the explanatory notes to the Central Excise Tariff. These would evidently have no relevance to a construction to be placed on the provisions of the relevant entry in the MVAT Act.
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10. The entry in question, C-74, adverts to plastic footwear.
The entry has to be construed as it stands. The Respondent submitted before the Tribunal that it was the predominant nature of the material used that must be a determining factor. The Tribunal accepted the submission and held that footwear which is made predominantly of plastic and which is made by a moulding process would be covered by the description of "plastic moulded footwear". In response to a query of the Court, Counsel appearing on behalf of the Respondent submitted that so long as the element of plastic in the footwear is in excess of 50%, the product must fall for classification as plastic footwear. It is impossible to accept the submission. The Legislature has provided for a specific classification of plastic footwear to which a rate of duty of 4% was applicable at the material time. In order to fall for classification under Entry C-74, the product must constitute plastic footwear.
Adding the expression "predominant" to the interpretative process is to add words to the entry. That is to amend the entry -
something that is impermissible. In a matter of classification, no single or universal test can be adopted. In the decision of the Supreme Court in A.Nagaraju Bros vs. State of Andhra Pradesh, ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 15 stsa23.10-24.6 (supra), the Tribunal had given more importance to the values of the plastic and other materials such as steel, including the locks and other fixtures and had opined that since the value of the other components was more than the value of plastic, the article could not be called a plastic article. The Supreme Court noted that there was no single or universal test to be applied and it is for this reason probably that the common parlance test or commercial usage test is treated as a more appropriate test, though not the only one. The Court held that there may be cases, particularly in the case of new products, where this test may not be appropriate.
In such cases, other tests like the test of predominance, either by weight or value or on some other basis may have to be applied.
But, ruled the Supreme Court, it is not possible nor desirable to lay down any hard and fast rules of universal application.
11. This principle was reiterated in a judgment of the Supreme Court in O. K.Play (India) Ltd. vs. Commissioner of Central Excise.4 Mr.Justice S.H.Kapadia (as the Learned Chief Justice of India then was) while adverting to the judgment in 4 (2005) 2 SCC 460 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 16 stsa23.10-24.6 A.Nagaraju Bros. held that there cannot be a static parameter for correct classification. Since the scheme of the Central Excise Tariff is based on the Harmonized System of Nomenclature (HSN) and the explanatory notes thereto, HSN together with its explanatory notes would provide a safe guide for interpretation of an entry in the Central Excise Tariff. Equal importance, the Court held, would be given to the Rules for Interpretation of the Excise Tariff.
Moreover, it would be important to bear in mind that functional utility, design, shape and predominant usage would have to be taken into account while determining the classification of an item.
These aids and assistance, held the Supreme Court, would be more important than the names used in the trade or common parlance in the matter of correct classification. These observations of the Supreme Court emphasize that the nature of the legislation would have an important bearing on the question in issue. HSN together with its explanatory notes has relevance to interpreting the Central Excise Tariff because that Tariff is based on the HSN.
12. In Geep Flashlight Industries Ltd. vs. Union of India,5 5 1985 (2) E.L.T.3 (S.C.) ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 17 stsa23.10-24.6 the Supreme Court considered the interpretation to be placed on Tariff Entry 15A(2) of the Central Excise Tariff which dealt with "articles made of plastics of all sorts including tubes, rods, sheets ..." The issue was whether a plastic torch manufactured by the Petitioner was covered by residuary item 68 and not by tariff Item 15A(2). The Supreme Court held that "articles made of plastic would mean articles made wholly of (the) commodity commercially known as plastics and not articles made from plastics along with other materials. The plastic torch was held not to fall within the description of an article made of plastic. The Supreme Court held that the High Court had arrived at the correct conclusion that the expression "articles made of plastics" used in Tariff Item No.15A(2) does not cover such articles which are not directly made from the material indicated in sub-Item (1), but such articles as are made out of such material. This decision was followed in a subsequent judgment of the Supreme Court in Wiltech India Ltd. vs. Collector of Central Excise.6 In that case, the Tribunal has held, following the decision in Geep Flashlight that a razor manufactured by the Appellant was not wholly made 6 1996(84) E.L.T.5 (S.C.) ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 18 stsa23.10-24.6 of plastic, but was made of plastic with an iron rod and could not, hence, be covered by an exemption notification. The Supreme Court noted in appeal that while the handle of razor was made of plastic, the hollow portion was filled with an iron rod running through the length of the handle. Hence, the Tribunal was held to be right in holding that the razor could not be said to be made wholly from plastic, but it was made of plastic with an iron rod and was not hence, covered by the notification in question. In Taxplas (India) Pvt. Ltd. vs. Collector Central Excise,7 the Supreme Court followed the judgment in Geep Flashlight which had taken the view that articles made of plastic must be articles made wholly of the commodity commercially known as plastics and not articles made from plastic along with other materials. All these judgments of the Supreme Court are authority for the proposition that an article can be said to be made of plastic when it is made wholly of the commodity which is commercially known as plastic. An article made from plastic along with other material cannot be regarded as an article made of plastic.
13. In A.Nagaraju Bros vs. State of Andhra Pradesh, 7 1996(84) E.L.T. 18 (S.C.) ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 19 stsa23.10-24.6 (supra). The issue before the Supreme Court in appeal was whether the "VIP suitcases" in question were plastic articles within the meaning of Entry 113 of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957. The question arose with reference to Assessment Year 1981-82. Prior to 1 July 1985, there was no entry specifically dealing with suitcases and Entry 113 read as "plastic sheets and articles". With effect from 1 July 1985, the entry was amended to read "plastic sheets and articles excluding those allied goods falling under any other item" whereas Entry 163 read "All kinds of suitcases, brief cases and vanity bags". The Supreme Court observed that it was considering suitcases made of plastic by injection moulding and fitted with steel bands, locks and ancillaries made of other materials. According to the Appellant, those suitcases were plastic articles within the meaning of Entry 113, a submission which was not accepted by the Deputy Commissioner, the Tribunal and the High Court. The Supreme Court noted that the decisions of the Tribunal in the case of certain other dealers were not uniform. In the case of some similar dealers, the Tribunal had taken the view that the suitcases were plastic articles. In the case of very same dealer pertaining to Assessment Year 1983-84, ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 20 stsa23.10-24.6 the Tribunal had followed its decision in other cases and had held that the suitcases were plastic articles. However, a contrary view was expressed in the case of Assessment Year 1981-82. The Supreme Court adverted to the decision of the Tribunal in Blow Plast wherein several circumstances were spelt out in holding that the suitcases were plastic articles. The Supreme Court held that the main raw material was plastic and in common parlance the suitcases were understood to be plastic goods. Though certain other material was used in the manufacture of suitcases and the value may be substantial, the Supreme Court was of the view that having regard to the several circumstances set out in the judgment of the Tribunal, in the case of Blow Plast. and applying the common parlance test and the test of usage in trade circles, the goods must be called plastic goods. The Supreme Court noted that since in the case of the very assessee for a subsequent Assessment Year, the Tribunal had allowed the appeal of the assessee following its decision in the case of Blow Plast and the goods were identical, reference had been made to the material referred to in the judgment in Blow Plast. Hence, the Supreme Court held that while the Revenue was correct in asserting that the issue relating ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 21 stsa23.10-24.6 to each Assessment Year must be decided on the material adduced in those proceedings, it could not be said that the material in other cases was being relied upon to determine the question at issue.
14. The decision in Nagaraju Bros. emphasizes that no single or universal test can be applied in such matters. The common parlance or universal usage test is treated as more appropriate though it is not the only test. The Supreme Court held that it was not possible or desirable to lay down a hard and fast rule of universal application. The decision in Nagaraju clearly turns upon the facts which have been adverted to in a significant amount of detail in the judgment. More specifically, there was the circumstance that in the case of the very same assessee for a subsequent year, the Tribunal had accepted the contention of the assessee while allowing an appeal following its judgment in the case of another assessee. For these reasons, the decision in Nagaraju would not advance the case of the Respondent.
Nagaraju does not lay down a principle or test at variance with Geep Flashlight and Wiltech.
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15. The Karnataka High Court considered the provisions of a similar entry in the State Value Added Tax Act, 2003 in Preston India Pvt. Ltd. vs. State of Karnataka.8 Entry 47 of the Third Schedule to the Act was entitled "Plastic Footwear" for the period between 1 April 2005 and 6 June 2005. With effect from 7 June 2005, a substituted provision came into force and the relevant entry read as "Moulded plastic footwear, hawaii Chappals and their straps". The Appellant manufactured two types of footwear. One of them, known as Walkie Chappal, had a sole which was made up of two layers, the upper layer consisting of a plastic polymer, while the bottom layer was made up of a rubber sheet. The strap of the footwear, called as the upper, was made up of man made fabric with plastic coated on it. The Appellant contended that this product was taxable as plastic footwear. The second product of the Appellant was called EVA footwear in which both the sole and the strap consisted of EVA polymers, moulded together. The Appellant sought an advance ruling from the Authority. In the case of the Walkie Chappal, the Authority held that the Appellant was 8 (2007) 35 MTJ 139 ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 23 stsa23.10-24.6 not entitled to the benefit of the entry relating to plastic footwear and that the Appellant would have to pay a higher rate of tax of 12.5% as opposed to 4%. In the case of EVA footwear, the Appellant was allowed a classification under the entry relating to plastic footwear for the period from 1 April 2005 to 6 June 2005, but not thereafter. A Division Bench of the Karnataka High Court held that for the period 1 April 2005 to 6 June 2005 when the entry read as plastic footwear, the Walkie Chappal could not be classified under that entry. The High Court observed that the material used for the upper portion of the footwear is man made fabric with plastic coating. Hence, the High Court upheld the reasoning of the Authority that the footwear did not fall within the description of plastic footwear. In the case of EVA Chappal, the High Court noted that the product was made of plastic and the Authority was not justified in rejecting the claim for classification only on the basis that the footwear was not made from a single mould.
16. This judgment of the Karnataka High Court clearly supports the case of the Appellant before us that in order to be ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 24 stsa23.10-24.6 classified as plastic footwear, the footwear must be made out of plastic. As in the case of the Walkie Chappal before the Karnataka High Court, in the present case as well, the upper part of the footwear consists of man made fabric upon which a plastic coating is applied. In similar circumstances, the Karnataka High Court which was interpreting a similar entry - plastic footwear - held that for this reason, the footwear would not fall for classification under that entry. Similarly, in the case of the EVA Chappal, what was found significant was that the footwear was made of plastic.
17. Counsel for the Respondent sought to distinguish the judgment of the Karnataka High Court on the ground that the Walkie Chappal there, had a sole which also consisted of a rubber sheet. This, in our view, cannot be a ground for distinction. The judgment of the Karnataka High Court rests on the principle that where the material which is used in the manufacture of the footwear is not plastic, but man made fabric, upon which a plastic coating is applied, such footwear would not fall for classification under entry "plastic footwear". We are in agreement with the view of the Karnataka High Court. The view of the Karnataka High ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 25 stsa23.10-24.6 Court is also consistent with the law laid down by the Supreme Court in Geep Flashlight which was followed in the subsequent decision in Wiltech.
18. The Respondent sought a determination under Section 56 of the MVAT Act, based on a tax invoice relating to a product which the Respondent claimed was plastic footwear. The material upon which reliance was placed by the Respondent primarily consisted of certificates from the FDDI and the Institute of Chemical Technology. All the certificates are consistent when they state that the upper part of the product incorporates textile material upon which a plastic coating is applied. Many of the certificates opined that the product is plastic footwear on the basis of the explanatory notes contained in Section XII of Chapter 64 of the Central Excise Tariff. The explanatory notes to the Central Excise Tariff cannot determine the interpretation of the entry in question, in the MVAT Act, 2002. The HSN has not been adopted in the Maharashtra Value Added Tax Legislation by legislative incorporation. Hence, it would not be permissible to rely upon the explanatory note contained in legislation pertaining to the Central ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 26 stsa23.10-24.6 Excise Tariff. The basis and foundation upon which the Respondent claimed classification of its footwear as plastic material, was hence, flawed and erroneous.
19. We may note that during the course of the hearing, Counsel for the Revenue has submitted that in the market footwear made completely of plastic is available for sale. This has not been disputed by Counsel appearing on behalf of the Respondent. Counsel for the Appellant has also produced samples of footwear completely made up of plastic and also of plastic coated textile material. When Entry C-74 adverts to plastic footwear, it must mean what it states. To accept the contention that footwear made predominantly of plastic would fall for classification under Entry C-74, would be to re-write the entry.
The Tribunal, in our view, was manifestly in error in accepting the contention of the Respondent and in holding that footwear which is predominantly made of plastic and made by a moulding process would get covered by the description of plastic moulded footwear.
20. For the reasons which we have indicated, the appeal ::: Downloaded on - 09/06/2013 17:23:52 ::: VBC 27 stsa23.10-24.6 would have to be allowed and is accordingly allowed. We answer both the questions of law in the negative. There shall no order as to costs.
( Dr.D.Y.Chandrachud, J.) ( Anoop V. Mohta, J.) ::: Downloaded on - 09/06/2013 17:23:52 :::