2010 (8) TMI 852 - HC - VAT and Sales Tax

Court overturns tax assessment, upholds exemption for di-calcium phosphate.

Godrej Agrovet Limited Versus Additional Commissioner of Commercial Taxes, Zone II, Bangalore

Godrej Agrovet Limited Versus Additional Commissioner of Commercial Taxes, Zone II, Bangalore - [2011] 39 VST 20 (Kar) Issues Involved:1. Justification for invoking Section 64 of the Karnataka Value Added Tax Act, 2003.2. Classification of di-calcium phosphate (animal feed grade) under the First Schedule or the Third Schedule of the Act.Issue-wise Detailed Analysis:1. Justification for Invoking Section 64 of the Act:Section 64 of the Karnataka Value Added Tax Act, 2003, grants revisional powers to the Commissioner and Additional Commissioner. The provision allows the Additional Commissioner to revise any order if it is erroneous and prejudicial to the interest of the Revenue. The court referenced the Supreme Court's interpretation of a similar provision in the Income-tax Act in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax, emphasizing that both conditions-error and prejudice to Revenue-must be satisfied for invoking revisional powers.The first appellate authority had relied on the Supreme Court's judgment in the case of M/s. Kerala Chemicals and Proteins Ltd., which classified di-calcium phosphate (animal feed grade) as 'preparations of a kind used in animal feeding' under tariff heading 2302.00 of the Central Excise Tariff. This classification was upheld by the apex court, confirming that the product falls under Chapter 23, attracting nil duty.The court concluded that the first appellate authority's order was in line with the Supreme Court's ruling and was neither erroneous nor prejudicial to the Revenue. Therefore, the Additional Commissioner's invocation of Section 64 was deemed unjustified and without jurisdiction.2. Classification of Di-calcium Phosphate (Animal Feed Grade):The court examined whether di-calcium phosphate (animal feed grade) should be classified under entry 5(i) of the First Schedule or entry No. 51 at serial No. 62 of the Third Schedule of the Act.First Schedule Entry 5(i):'Animal feed and feed supplements, namely, processed commodity sold as poultry feed, cattle feed, pig feed, fish feed, fish meal, prawn feed, shrimp feed and feed supplements and mineral mixture concentrate, intended for use as feed supplements.'Third Schedule Entry 51, Serial No. 62:'Phosphinates, phosphonates, etc.'The court noted that di-calcium phosphate (animal feed grade) is a feed supplement used in the manufacture of animal feeds. The product is not specifically mentioned in either Schedule. However, it is recognized as a feed supplement, as established by the Supreme Court in previous judgments.The court referenced the Supreme Court's judgment in the case of Collector of Central Excise, Guntur v. Surendra Cotton Oil Mills and Fertilisers Company, which clarified that preparations used to supplement animal feed are considered animal feed supplements. The court also cited the case of Dunlop India Limited and Madras Rubber Factory Limited v. Union of India, emphasizing that the classification should be based on the product's primary function and its association with animal feed.The court concluded that di-calcium phosphate (animal feed grade) is a feed supplement used exclusively in the manufacture of animal feeds and does not fall under industrial inputs or packing materials. Therefore, it should be classified under entry 5(i) of the First Schedule, exempting it from tax.Order:1. The appeal is allowed.2. The order passed by the Additional Commissioner of Commercial Taxes is set aside.3. The order passed by the first appellate authority is restored.4. Parties to bear their own costs.