Gold bar classification turns on whether finished minted bars are bullion or semi-manufactured goods for tax purposes.

Ten gram rectangular gold bars marketed by a bank were classified as gold, semi-manufactured, rather than bullion, because the HSN-based classification rules treated bullion as unwrought gold used as raw material, while the disputed bars were polished, minted and finished products bearing markings and a logo. The Kerala High Court noted that semi-manufactured gold items were separately covered in the Third Schedule before 1 April 2009 and did not fall within the bullion entry. The clarification issued under Section 94 treating the bars as taxable at four per cent was therefore upheld, and the classification challenge failed.

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Issues: Whether 10 gram rectangular gold bars marketed by the assessee-bank are classifiable as bullion under Entry 1(2) of the Second Schedule to the Kerala Value Added Tax Act, 2003 or as gold, semi-manufactured under Entry 4(4) of the Third Schedule to the Act, and whether the clarification issued under Section 94 of the Act treating such bars as taxable at four per cent was correct.

Analysis: The classification had to be determined with reference to the HSN-based interpretation rules in the Act. The product was a polished, minted rectangular gold bar bearing markings, logo and finish, and was not a raw unwrought gold mass used as a manufacturing input. The Court held that bullion in the relevant schedule referred to gold in unwrought form used as raw material, whereas the disputed item was a finished small-size minted product obtained after further processing. The Court also noted that before 1 April 2009 semi-manufactured gold items were separately covered in the Third Schedule and were not within the bullion entry. The contention regarding prospective operation of the clarification was not gone into because the challenge was only to the clarification issued in another dealer's case.

Conclusion: The 10 gram rectangular gold bar was not bullion and was correctly treated as falling under Entry 4(4) of the Third Schedule, so the clarification charging tax at four per cent was upheld and the assessee's appeal failed.

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