2009 (2) TMI 778 - AT - VAT and Sales Tax

Classification of silicon carbide paper and emery paper under West Bengal VAT Act

The Tribunal ruled that silicon carbide paper and emery paper should be classified as 'tools for carpentry' and 'tools for masons' under entry 83(f) of ... Whether silicon carbide paper and emery paper (paper coated abrasives) would fall within the entry made against serial No. 83(a) or 83(f) of Part I of Schedule C to the West Bengal Value Added Tax Act? Held that:- Paper coated abrasive which includes silicon carbide paper and emery paper should be treated as item falling within 'tools for carpentry' and 'tools for masons' as items falling under 83(f) of Part I of Schedule C to the VAT Act. But before we part with this case, we are of the view that to avoid confusions in future with regard to the entries 'super abrasives, non-woven abrasives, bonded abrasives other than stone for polishing floor, stone for sharpening carpenters' instruments, tile polishing blocks and rubbing bricks' in 83(a) of Part I of Schedule C to the VAT Act, the authority concerned should consider whether such entries should remain there or such items should be classified in appropriate manner keeping in view the observation made hereinbefore. Issues Involved:1. Classification of silicon carbide paper and emery paper under the West Bengal Value Added Tax Act.2. Authority of the Assistant Commissioner of Commercial Taxes, Central Section (ACCT/CS) to determine tax rates and demand payment.Issue-wise Analysis:1. Classification of Silicon Carbide Paper and Emery Paper:The primary issue was whether silicon carbide paper and emery paper (paper coated abrasives) should fall under entry 83(a) or 83(f) of Part I of Schedule C to the VAT Act, or alternatively under entry 53 of Part I of Schedule C. The rate of tax was a significant factor, with the petitioners arguing for a 4% rate and the respondent authorities asserting a 12.5% rate under Schedule CA.The applicants initially sought clarification from the Public Relations Officer, who indicated that super-abrasives, non-woven abrasives, and bonded abrasives would be taxed at 4% under entry 83(a). However, the ACCT/CS later determined a 12.5% tax rate, leading to a dispute.The applicants contended that their items should be classified under power tools (entry 83(a)) or hand tools (entry 83(f)), arguing that the term 'such as' in these entries implied a broader category. They cited the Orissa High Court decision in Foremost Dairies Limited v. State of Orissa to support their argument that entries are illustrative, not exhaustive.The Tribunal analyzed the definitions and uses of power tools, hand tools, and abrasives. It concluded that while abrasives could be used in machines, they are not independently power-driven tools. The Tribunal found that the items in question, silicon carbide paper and emery paper, do not fit within the category of power tools as they are not capable of using power independently.Regarding entry 83(f) (hand tools), the Tribunal considered the definitions and uses of hand tools and concluded that these abrasives, used by carpenters and masons for specific tasks, should be classified as hand tools. The Tribunal emphasized that the items' use in carpentry and masonry justified their classification under entry 83(f).The Tribunal rejected the argument that these items could fall under entry 53 (paper), noting that their primary use is for abrasion, not for writing or printing, as typically understood for paper.2. Authority of the Assistant Commissioner of Commercial Taxes, Central Section (ACCT/CS):The applicants challenged the authority of the ACCT/CS to determine the tax rate and demand payment. They argued that the ACCT/CS, being subordinate to the Commissioner of Sales Tax, could not contradict the Commissioner's view.The Tribunal addressed this issue by affirming that officers in the Central Section have jurisdiction throughout West Bengal and can be considered appropriate assessing authorities under rule 2(c) of the VAT Rules. However, the Tribunal clarified that no demand for tax payment could be made without a formal assessment.Conclusion:The Tribunal concluded that silicon carbide paper and emery paper should be classified under 'tools for carpentry' and 'tools for masons' (entry 83(f)) and thus be taxed at the lower rate of 4%. The Tribunal set aside the ACCT/CS's direction to pay the alleged shortfall without formal assessment. The petition was disposed of with no order as to costs.The Tribunal also suggested that the relevant authorities consider reclassifying certain items in entry 83(a) to avoid future confusion.