Rajasthan High Court - Jaipur
Asstt Commissioner Com Taxes Dept ... vs M/S Jyoti Laboratories Ltd on 26 July, 2017
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT
JAIPUR
S.B. Sales Tax Revision / Reference No. 31 / 2016
Asstt Commissioner, Anti-Evasion, Zone-1, Commercial Taxes
Department, Jaipur, Rajasthan
----Petitioner
Versus
M/S Jyoti Laboratories Ltd., B-201. Maharaja Apartment, Banipark,
Jaipur, Rajasthan
----Respondent
Connected With
S.B. Sales Tax Revision / Reference No. 29 / 2016
Asstt Commissioner Com Taxes Dept Jaipur
----Petitioner
Versus
M/S Jyoti Laboratories Ltd
----Respondent
S.B. Sales Tax Revision / Reference No. 30 / 2016
Asstt Commissioner Com Taxes Dept Jaipur
----Petitioner
Versus
M/S Jyoti Laboratories Ltd
----Respondent
S.B. Sales Tax Revision / Reference No. 32 / 2016
Asstt Commissioner Com Taxes Dept Jaipur
----Petitioner
Versus
M/S Jyoti Laboratories Ltd
----Respondent
S.B. Sales Tax Revision / Reference No. 33 / 2016
Asstt Commissioner Com Taxes Dept Jaipur
----Petitioner
(2 of 19)
[STR-31/2016]
Versus
M/S Jyoti Laboratories Ltd
----Respondent
S.B. Sales Tax Revision / Reference No. 34 / 2016
Asstt Commissioner Com Taxes Dept Jaipur
----Petitioner
Versus
M/S Jyoti Laboratories Ltd
----Respondent
Reserved on : 7th July 2017
Pronounced on : 26th July 2017
_____________________________________________________
For Petitioner(s) : Mr. R.B. Mathur with Ms. Meenal Ghiya
For Respondent(s) : Mr. V. Laxmikumaran, Sr. Adv. with
Mr. Sarvesh Jain
Mr. Sameer Jain
Mr. Shrey Ashat
_____________________________________________________
HON'BLE MR. JUSTICE JAINENDRA KUMAR RANKA
Judgment
1. These petitions, at the instance of Revenue, for the
assessment years 2007-08, 2008-09, 2009-10, 2010-2011, 2011-
12, and 2012-13, are directed against common order dt 1.9.2015
passed by the Rajasthan Tax Board, Ajmer. Since the facts are
identical and common for all the years with the consent of the
learned counsel, all these petitions have been heard finally and
are being decided by a common judgment.
(3 of 19)
[STR-31/2016]
2. Heard learned counsel for the parties. The issue
requires consideration. Accordingly the appeals are admitted on
the following substantial questions of law :-
(i) Whether in the facts & circumstances of the case, the
Rajasthan Tax Board was justified in law and has not acted
illegally and perversely in holding that "Ujala Supreme" Fabric
/ Laundry Whitener sold by assessee falls in the category of
Industrial Input / Synthetic Colouring Matter and is liable to
tax under Entry 119 of Schedule-IV Part-B instead of
Schedule-V as held by the Assessing Officer ?
(ii) Whether in the facts & circumstances of the case, the
Rajasthan Tax Board has not acted illegally and perversely in
deleting the tax, interest and penalty holding the goods sold
by assessee are liable to tax @ 4/5% despite of the facts that
there is no specific Entry and the general Entry invites tax
liability @ 12.5/14% ?
3. Brief facts noticed for disposal of the present petitions
are that the respondent assessee is a Limited Company and is
engaged in the business of trading in product called "Ujala
Supreme", which is claimed to be made by dilution of Acid Violet
Paste (in short AVP), which is classifiable under Tariff Entry
No.3204.12.94 of the Central Excise Tariff Act, 1985.
4. A survey was conducted at the business premises of the
respondent assessee on 30.8.2012 wherein certain incriminating
documents were found and, therefore, further investigation was
carried.
5. It is claimed by the assessee that indisputably, apart
from dilution of AVP no other process is undertaken to produce
"Ujala Supreme", and it is also claimed on behalf of the
respondent that "Ujala Supreme" does not contain any other
ingredient other than AVP and Water. The claim of assessee has
(4 of 19)
[STR-31/2016]
been that the said product "Ujala Supreme" is classifiable under
Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Rajasthan
Value Added Tax Act, 2003 (in short 'the Act of 2003') and VAT is
accordingly payable @ 4% or 5%, as the case may be. However,
the Assessing Officer was not satisfied with the claim of
respondent assessee and it was, prima facie, opinion of the AO
that since the said product is not covered by any of the specified
Entries of Schedule-IV, and once the product does not fall in any
specific Entry, it will fall in the Residuary Schedule-V, and VAT
would be leviable @ 12.5% / 14%, as the case may be.
6. On behalf of the respondent, a detailed reply has been
filed claiming, inter alia, that "Ujala Supreme" is nothing but a
diluted AVP, which retains the character and use of AVP and the
product is 99% water and 1% Acid Violet and one has to put only
3-4 drops of "Ujala Supreme" in one litre water to wash clothes.
The claim of assessee was also that the said product is not
excisable. Though the Excise Department tried to levy Excise
Duty, but on account of certain judgments in the case of assessee
itself, Excise Duty was not payable. However, the AO was not
satisfied with the claim and accordingly held that the product is
not specifically specified in any of the Entries and, thus, would fall
in Schedule-V and accordingly levied tax @ 12.5% / 14%, as the
case may be, and charged differential rate. The AO also relied on
a judgment of Kerala High Court in the case of M/s M.P.
Agencies v. State of Kerala [2010] 28 VST 44, on the same
product.
(5 of 19)
[STR-31/2016]
7. The AO was also satisfied that it is a case where the
assessee has concealed particulars and is also exigible for levy of
penalty u/s 61 of the Act of 2003 and also charged interest.
8. Not being satisfied with the said order, the respondent
assessee carried the matter in appeal before the Appellate
Authority, where also a detailed explanation was submitted and it
was also claimed before the AA that other courts on the same
product, have held in favour of the respondent assessee and also
relied upon judgment of Hon'ble Apex Court in the case of M.P.
Agencies v. State of Kerala (2015) 7 SCC 102, where the Apex
Court had an occasion to consider the same product, namely
"Ujala Supreme".
9. The ld. AA, taking into consideration the issue which
had arisen before other courts and the Hon'ble Apex Court, held in
favour of the assessee and accepted the contention of assessee
that the product falls in a specific Entry and once it falls in a
specific Entry then question of taking it to the Residuary Category,
does not arise and since the claim was allowed, penalty u/s 61
was also directed to be deleted. Interest was also deleted as the
claim of the assessee was accepted.
10. The Revenue being not satisfied with the order of AA,
preferred appeal before the ld. Tax Board reiterating the facts
noticed by the AO and in contending that the product being not
specifically entered in any of the specific Entries, it would fall in
the Residuary Category, however, the Tax Board was not inclined
with the claim of Revenue and taking into consideration the fact
(6 of 19)
[STR-31/2016]
that the issue is squarely covered in favour of the assessee in the
case decided by Hon'ble Apex Court in M.P. Agencies (supra),
dismissed the appeals.
11. Learned counsel for the Revenue vehemently contended
that the specified product "Ujala Supreme" is a laundry whitener /
fabric whitener and does not fall within any specific Entry as
claimed by the assessee. Learned counsel further contended that
neither in Entry 119 nor in 121 of Part-B of Schedule-IV, nor in
Entry 69 of Schedule-IV, the product can be classified and once
the product does not fall in a specified Entry, then the AO was well
justified in holding the product liable to higher rate of tax and
falling in Schedule-V only. Learned counsel further contends that
the product of assessee is a finished product, meant for specific
purpose i.e. for brightening of the clothes and is marketed as
such, and also placed on record the ingredients available in "Ujala
Supreme" from website of the respondent. It is further claimed
that these are merely consumer products and not an industrial
product and the product is being sold in small packages, in small
quantities of 30 ml, 75 ml, 125 ml and 250 ml and is being
purchased by the consumers according to their choice. Had it
been an industrial product, it would have been sold in bulk
quantity and not in small packages.
12. Learned counsel further contends that it is merely a
household product and huge advertisement is being published by
the assessee attracting the public at large and is available on
various consumer based websites like Amazon.in, Flipkart.in,
(7 of 19)
[STR-31/2016]
Ebay.in etc. Learned counsel also contends that the claim of
assessee that it is Acid Violet Paste which falls under the HSN code
3204.12.94 of the Central Excise Tariff Act, 1985, but the product
cannot be treated as AVP in its original form as specified in HSN
Code, and claims that the process of making "Ujala Supreme" is
different and for making the finished product of "Ujala Supreme"
the assessee has to purchase duty paid Acid Violet Paste from the
requisite dealers. Learned counsel also relied upon judgment of
the Kerala High Court in M/s M.P. Agencies v. State of Kerala
(supra), in assessee's own case, to contend that the Kerala High
Court had an occasion to consider the same product and directed
to tax at the highest rate i.e. to be carried to the Residuary Entry.
13. Learned counsel also contended further that even if a
common parlance test is applied as observed by the Apex Court
time and again in such cases, then the product is merely a laundry
whitener / brightener, and will not be treated as industrial input. If
a consumer goes to purchase the product "Ujala Supreme", then
the trader will give the same product to be sold as such and not as
an industrial product, and thus contended that the finding reached
by the AO was well reasoned and justified, who took into
consideration all facts and material and the finding reached by
both the Appellate Authorities deserve to be reversed. Learned
counsel relied upon Atul Glass Industries (Pvt.) Ltd. v.
Collector of Central Excise (1986) 3 SCC 480, M/s Mauri
Yeast India Pvt. Ltd v. State of U.P. & Another 21 Tax Update
60 (SC), State of Tamil Nadu v. Pyare Lal Malhotra & Others
(8 of 19)
[STR-31/2016]
(1976) 1 SCC 834, the judgment of this court in M/s Pidilite
Industries Limited v. Rajasthan Tax Board & Others [STR
104/2014, decided on 13.4.2017], and also contended that the
RVAT Act of 2003 itself being a separate Act, provisions of the
Central Excise are not applicable.
14. Learned counsel also contends that it is clear cut case
of concealment and penalty u/s 61 was rightly imposed by the ld.
AO and deserves to be upheld.
15. Per contra, learned Senior Counsel for the respondent
contends that the product "Ujala Supreme" specifically falls in Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Act of 2003, and both the Appellate Authorities, after concurrent finding, have upheld the claim of respondent assessee by detailed reasoning, which is not required to be interfered with. Learned counsel further contends that the AO placed reliance on the judgment of Kerala High Court in the case of M/s M.P. Agencies v. State of Kerala (supra), which was holding field at the time when the assessment was passed, but the said judgment of Kerala High Court was reversed by the Hon'ble Apex Court in the case of M.P. Agencies v. State of Kerala (supra), and once the Apex Court has reversed the finding reached by Kerala High Court, then placing reliance by the learned counsel for Revenue and by the AO goes out of picture. Learned counsel drew attention of this court by showing from the observation of the Apex Court in the case of M.P. Agencies (supra) that the claim of assessee has rightly been taken care of by both the Appellate Authorities. Learned counsel further (9 of 19) [STR-31/2016] contends that the Apex Court has held that the product "Ujala Supreme" is nothing but diluted form of AVP and the fact that AVP has been diluted to make "Ujala Supreme", will not make emergence of any new product.
16. Learned counsel also drew attention of the court that this very product came up for consideration before several other courts and all the courts have decided the issue in favour of the assessee except the Kerala High Court in M/s M.P. Agencies v. State of Kerala (supra), which too was reversed by the Apex Court. Learned counsel also contends that the said item is though classified under the HSN Code 3204.12.94, but the Central Excise Department has also time & again tried to charge / levy Central Excise but in view of the judgment of the courts in the case of assessee itself it has been held that even Central Excise is not leviable. Learned counsel also contends that a Notification was introduced by the State Government bearing no.F.12(22)/FD/Tax/10-14 dt 24.5.2010 and a note too was appended to the said Notification clearly bringing that the rules for the interpretation of the provisions of Central Excise Tariff Act, 1985, shall apply to any order passed u/s 36 of the RVAT Act of 2003, and thus claims that even HSN Code is applicable. In support of his claim, apart from the judgment of Apex Court, learned counsel relied on M/s Jyothy Laboratories Ltd. v. State of Assam & Others (2011) 46 VST 308, The State of Assam & Others v. M/s. Jyothy Laboratories Ltd. (2012) 55 VST 371, Commissioner of Central Excise, Chandigarh v.
(10 of 19) [STR-31/2016] Shital International (2011) 1 SCC 109, Commissioner of Customs, Mumbai v. Toyo Engineering India Ltd. (2006) 7 SCC 592, Collector of Central Excise, Surat v. Besta Cosmetic Ltd. (2005) 3 SCC 790.
17. I have heard learned counsel for the parties and have meticulously perused the material on record, including the judgments cited by both the learned counsel.
18. Before proceeding ahead, it would be appropriate to quote the Entries in Schedule appended to the Act of 2003, which are to be considered in the instant case :-
-----------------------------------------------------------------------
Schedule Item Entry Rate of
Tax(%)
-----------------------------------------------------------------------
IV Part-B 119 Synthetic organic colouring 4/5
(Goods under matter whether or not
category of chemically defined,
industrial preparations based on
inputs synthetic organic colouring
matter, excluding catechu
or gambiar
-----------------------------------------------------------------------
IV Part-B 121 Master Batches, other 4/5 (Goods under colouring matter including category of ultra marine industrial inputs
-----------------------------------------------------------------------IV 69 Industrial inputs as 4/5
specified in Part-B of this Schedule
-----------------------------------------------------------------------
(11 of 19) [STR-31/2016]
19. The salient features of the product has earlier been highlighted. Both the Appellate Authorities have given a finding that the said product "Ujala Supreme" is classifiable under Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Act of 2003. From the facts noticed hereinbefore and analysed earlier, the Entry starts with "Synthetic Organic Colouring Matter" and, therefore, any preparation based on "Synthetic Organic Colouring Matter", should in my opinion, will also fall in the said Sub-Entry 119 referred to hereinbefore.
20. It is brought on record by learned counsel for the respondent assessee that "Ujala Supreme" is made after dilution of AVP, (a "Synthetic Organic Colouring Matter"), and apart from AVP, the only ingredient is Water. There is no counter by AO to this fact observed by both the Appellate Authorities, except mere version of the AO that this product does not fall in Sub-Entry 119 and falls in the Residuary Entry. The mere observation by the AO though with some vague reasoning, cannot hold that it will not fall in a specific Entry and would fall in the Residuary Catetory i.e. Schedule-V. The Revenue also was unable to prove as to after dilution of AVP to form "Ujala Supreme" whether any different product came into existence.
21. Learned counsel for the assessee placed reliance on a judgment of the Apex court in the case of M.P. Agencies v. State of Kerala (supra), wherein the issue under consideration of the Apex Court was relating to "Ujala Supreme", "Ujala Stiff" and "Ujala (12 of 19) [STR-31/2016] Shine", whereas the case in hand only relates to "Ujala Supreme"
and incidentally of levy of VAT under Kerala VAT Act, 2003.
22. The Apex Court, taking note of the salient features of the same product and in particular defining AVP, took note of the HSN Code. The Apex Court also took note of the Chemical Examiner's Report of the product of the assessee and it would be appropriate to quote paras 28, 36, 39, 40 and 41 of the judgment, which reads as under :-
"28. It is an admitted fact that Jyothy Laboratories purchases central excise duty paid AVP classifiable under the Heading 3204.12.94 and thereafter, the AVP is diluted in water and filled in plastic container and then sold under the brand name of 'Ujala'. As far as "Ujala Supreme" is concerned, it is urged that it is nothing but a diluted form of AVP. The AVP is merely diluted to create Ujala Supreme in the form of mathematical equation. Learned Counsel for the Appellant has referred us to report dated 30.8.2006 of the Institute of Chemical Technology, Matunga, Mumbai which has stated that the chemical composition of AVP and Ujala are the same except for the dilution in Ujala. The relevant part of the said report reads as follows:
"The Acid Violet Paste (referred as "AVP" hereafter) supplied to us confirms to Acid Violet 49, a synthetic organic dye 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) and the results 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) From the technical literature it can be understood that diluted acid violet 49 is used in the fabric finishing industries for imparting brightness to white fabrics. (The mechanism being the fabric absorbs all the colours in the visible light and transmits the bluish/purplish tint) (13 of 19) [STR-31/2016] As per technical report and the HPTLC report, it can be conclusively said that Ujala is nothing but a diluted form of Acid Violet Dye.
The observations of the HPTLC analysis are as follows:
* * *
(d) All the components present in diluted sample of AVP are also present in Ujala sample.
(e) No additional components are present in Ujala sample.
(f) The diluted AVP samples and the Ujala sample's spectral scans are super imposable and match exactly, which confirms that Ujala is a diluted form of AVP and chemically they both are identical.
From the above analytical and technical data, it can be concluded that "Ujala" is only a diluted form of Acid Violet 49 with water, which has the inherent characteristics of brightening clothes and does not contain any other additives or optical brightening agents. The brightness of the fabric is increased because it absorbs all the colours in the visible light and transmits the bluish/purplish tint, thus hiding the yellowing of the fabrics." Referring to the said report, it is submitted that when the 2003 Act has classified AVP under Entry 155(8)(d) and has classified it as equivalent to HSN Code No. 3204.12.94, it has to be put under that classification.
36. Learned Counsel for the Appellant has placed reliance on Jyoti Laboratories (supra), wherein the issue was that the product manufactured under the brand name Ujala was classified differently by the Assessee and the revenue. The Tribunal posed two relevant questions, namely:
(i) whether there is a process of manufacture and a new excisable goods had arisen in the preparation of the product Ujala; and
(ii) if so, what is the correct classification?
Thereafter, the Court referred to the opinion of the Chemical Examiner, wherein it has been stated thus: (Jyoti Laboratories case, ELT p.675, para 23) "23. ... '... The entire method of manufacturing was also verified. The factory is getting the Acid Violet and Fluorescent Whitening agent from Bombay. The fluorescent whitening agent is nothing but Ranipal as per the packing list on the tin.
Factory is making the Ujala by simply mixing these three items, Acid violet, ultra marine blue, fluorescent whitening agent in water heating them to a particular temperature and then filter this solution and bottling them in small packings and packing them in paper cartons for marketing, as such, there is no machinery is used for the production. All the process is done by manual labour only.
Hence, in my opinion, no new product is emerged by this process, only three colouring matters mixed together in a particular proportion for colouring the fabric.' "
(14 of 19) [STR-31/2016]
39. It is apt to note here that the majority opined that the Chemical Examiner's opinion is in accordance with the Tariff Ruling of the Board. These authorities fundamentally relate to the issue that there has been really no manufacture process for the purpose of classification. That apart we find from the test reports that there is only dilution in water and needless to emphasize the same does amount to or result in manufacture and hence, no new product emerges. Therefore the common parlance would come into play.
40. From the aforesaid discussion, it is clear as crystal that two goods/products have been held to be covered under the HSN Code 3905, and HSN Code 3204.12.94 and hence, there can be no shadow of doubt that the said entries fall under entry numbers 155(8)(d) and 118(5) of the list "A" of Third Schedule of the 2003 Act covering industrial inputs and packaging materials, but that would not be material and relevant regard being had to the rules of interpretation which are applicable. The subject matter of the list will not fall under residuary entry 103 in SRO 82/2006 dated 21.01.2006, if the goods in question fall in any entry of any of the schedule. That is what is conveyed by the language employed in Entry No. 103. The said Entry, as we find, does not stipulate or carves out any exception in respect of list "A" to the Third Schedule. That being the position, once goods fall under any of the HSN classification, that is, the goods/commodities that are included in list "A" to the Third Schedule, entry 103, which is residuary in nature, would not get attracted.
41. The submissions of learned Counsel for the State that the decisions under the Excise Act would have no play, for they deal with the issue of the manufacture, does not commend acceptance. The High Court has elaborately dwelled upon the issue of manufacture. We have noticed the judgments rendered by the CESTAT there is no manufacturing. It is pertinent to state here that the question of manufacture is not relevant for the purposes of 2003 Act. What is really relevant is the classification based upon the HSN number. The decisions rendered by the CESTAT have decided on the classification which is founded upon the HSN number. It has been laid down that after devolution with water the goods continue to remain classified under the same HSN number. This means that the goods remain in list "A" of the Third Schedule. It may be noted that the position would have been totally different had the goods in question been separately and specifically itemized in SRO number 82/2006 dated 21st January 2006. The goods which are specifically mentioned in any of the entries of the said SRO, would be chargeable to tax @ 12.5%. But that is not the lis here, for the Revenue has included the goods in the residuary Entry 103 and the said entry, by no stretch of reasoning, can be made applicable."
23. The Apex Court thus held that the goods/products are covered under HSN Code 3905 and HSN Code 3204.12.94 and also held that it covers as industrial inputs and packaging material.
(15 of 19) [STR-31/2016]
24. The AO had placed reliance on the Kerala High Court judgment in the case of M/s M.P. Agencies v. State of Kerala (supra) which, as aforesaid was reversed by the Apex Court and once a judgment of High Court has been reversed by the Apex Court, none can rely on the judgment of the High Court, and claim by the learned counsel for the assessee still placing reliance on the judgment of the Kerala High Court supra, is not justified and proper.
25. Apart from the direct judgment of the Apex Court on the same product (supra), learned counsel for the assessee has also placed reliance on judgment in the case of assessee itself before the Gauhati High Court in the case of Jyothi Laboratory v. State of Assam (supra), where also the product considered by the Gauhati High Court is of "Ujala Supreme". In the aforesaid case even the court found that the product comprised of :-
AV/49 - .98% Water - 99.02%
26. It would be proper to quote para 37 of the judgment :-
"37. On a totality of the above considerations, this Court is of the unhesitant view that the 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. This Court, for the reasons recorded hereinabove, is thus in respectful disagreement with the observatiosn and the conclusions recorded in M/s M.P. Agencies (supra). The impugned order dated 11.8.2020 when judged by the above touchstone is thus unsustainable in law and on facts. It is thus, quashed."
27. In the above judgment, the Gauhati High Court distinguished the judgment of Kerala High Court and came to independent reasoning.
(16 of 19) [STR-31/2016]
28. The said judgment of the learned Single Judge of Gauhati High Court was challenged by the State of Assam before Division Bench of the Gauhati High Court, which affirmed the judgment of the learned Single Judge vide judgment dt 3.9.2012 in State of Assam v. Jyothy Laboratories Ltd. (supra) and it would be appropriate to quote paras 20 and 21 of the Division Bench judgment :-
"20. We are in agreement with the line of reasoning adopted by the learned Single Judge. The product "Ujala Supreme" though is a highly diluted form of AVP, as has been rightly held by the learned Single Judge, it retains the essential characteristics of AVP. Therefore, it cannot be asid to be commercially distinct and different from the user product AVP, which is covered by Entry 114 of schedule II-C to the Act. In this respect, we may refer to the views expressed by the Hon'ble Supreme Court in the well known case of Union of India v. Delhi Cloth and General Mills reported in (1963) Supp 1 SCR 586 that manufacture signifies bringing into existence a new substance and not merely to effect a change in one. Therefore, we find no justifiable reason to accept the submission of the appellant state that the product emerges out of a manufacturing process and to place the product in the residuary category in the fifth schedule to the Act.
21. In view of the discussions made above, we are not inclined to take a view different from the one taken by the learned Single Judge. Accordingly, we find no merit in the appeal. Consequently, the same stands dismissed."
29. The Apex Court, time and again, in the cases of Western India Plywood Ltd v. Collector of Customs (2005) 12 SCC 731, Dunlop India Ltd. v. Union of India (1976) 2 SCC 241, has reiterated the well settled proposition that resort to Residuary Tariff Entry can only be made if a product does not squarely fall within any of the specified Entries, and a good deal of caution is required to be undertaken in the matter of classification, identification of an Entry and a description thereof would be relevant for assigning it to a particular Tariff Entry, and lodgment (17 of 19) [STR-31/2016] of an item in Residuary Category is approvable only if by no conceivable reasoning which can be brought within the purview of any other tariff item, and the burden always lie on the Revenue, if it intends to carry it to the Residuary Schedule.
30. The Apex Court has reiterated repeatedly and even in the case of M.P. Agencies (supra) that in such cases, common parlance test would come into play and the Apex Court held that even if common parlance test is applied then too, the product can certainly be said to be classifiable as aforesaid.
31. Though learned counsel for the assessee relied on a Circular / Notification of this court supra, that even the Rajasthan Value Added Tax has accepted that insofar as the Rules for interpretation of the provisions of Central Excise Tariff Act, 1985 read with explanatory notes as amended from time to time shall apply to these proceedings also and which was made effective by Notification dt 24.5.2010, to which learned counsel for the Revenue argued that at-least upto 24.5.2010 the said Notification was not in existence, therefore, at-least to the period prior to 24.5.2010 the said Notification being not applicable and prior to 25.5.2010 the rate applied by the AO should be upheld, but in my view it will not make any difference insofar as the said fact is concerned, particularly when the Apex Court on the same product as referred to hereinbefore in the case of M.P. Agencies v. State of Kerala (supra) has held the said product is specific and liable to a lower rate.
(18 of 19) [STR-31/2016]
32. Taking into consideration aforesaid, the first question is answered against the Revenue and in favour of assessee- respondent.
33. Learned counsel for the Revenue also submitted that penalty u/s 61 is leviable and it was rightly levied by the AO as the assessee evaded payment of correct tax.
34. In my view, no case of penalty is made out. Merely because an addition was made by the AO, is no reason for initiating penalty proceedings or even levying penalty. Admittedly, it is a case where the assessee claimed a lower rate and claiming to be falling in a specific Entry and Revenue intended to carry it to Residuary Entry, that does not mean that a case of concealment has been made out by the Revenue. On perusal of the assessment order it reveals that there is only a dispute about whether the product falls in a particular Entry or not and even during the course of survey, did not result into the sales not being found unrecorded/unvouched or otherwise. Even otherwise, the Apex Court in the case of Sree Krishna Electricals v. State of Tamil Nadu & Another (2009) 23 VST 249 (SC), and this court in CTO v. M/s. Bambino Agro Industries Ltd. (2016) 90 VST 22 (Raj), has held that in a case of classification of Entries, two views being possible, question of levy of penalty does not arise.
35. Be that as it may, both the Appellate Authorities have come to a concurrent finding and this court has also upheld the reasoning of the Tax Board and once tax is not leviable, penalty even otherwise automatically goes out of picture.
(19 of 19) [STR-31/2016]
36. Accordingly, the second question is also answered against the Revenue and in favour of the assessee.
37. Resultantly, all the petitions being devoid of merit, stand dismissed with no order as to costs.
( JAINENDRA KUMAR RANKA),J db 57-62