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of <h1>Manufacturer permitted to challenge tax hike on non-agricultural insecticides</h1> <h3>Godrej Sara Lee Ltd. Versus State of Karnataka and Others</h3> Godrej Sara Lee Ltd. Versus State of Karnataka and Others - [2012] 50 VST 223 (Kar) Issues:Challenge to amendment in Third Schedule of VAT Act for imposition of tax on insecticides, Jurisdiction of Deputy Commissioner of Commercial Taxes, Classification of petitioner's goods as scheduled insecticides, Legislative competence of State, Interpretation of entry 23 of Third Schedule, Applicability of trade parlance in classification for tax imposition, Efficacy of appeal process, Need for interpretation of amendment to entry 23.Analysis:The petitioner, a manufacturer of pesticides, challenged the amendment in the Third Schedule of the Karnataka Value Added Tax Act, 2003, which allowed the imposition of tax on insecticides used for non-agricultural purposes at a higher rate of 12.5% instead of 4%. The petitioner contended that the reassessment order by the authority was against principles of natural justice, as it determined a higher tax rate without proper basis.The petitioner argued that despite specific mention of insecticides in the amended entry 23 of the Third Schedule, his goods were not certified as scheduled insecticides. He claimed that the products were classified and certified by the Ministry of Agriculture under the Insecticides Act, 1968. The petitioner questioned the legislative competence of the State to amend the classification and sought to set aside the reassessment order imposing tax at 12.5%, requesting a 4% tax rate for specific insecticides used for agricultural purposes.The petitioner relied on a Division Bench judgment to assert that all insecticides fell under entry 23 of the Third Schedule, including mosquito repellants. The Government Pleader argued for classification based on trade parlance, citing Supreme Court precedents. The Government Pleader contended that the previous judgment by the High Court did not consider the principles laid down by the apex court and emphasized the need to interpret the amendment in the context of popular understanding.The Court acknowledged the petitioner's concerns regarding the efficacy of the appeal process and the likelihood of a futile exercise before the appellate authority subordinate to the Commissioner. The Court allowed the petitioner to approach the Appellate Tribunal with all contentions, directing the Tribunal to decide within three months. It also instructed the respondent authority not to recover the balance tax until the Tribunal's decision, emphasizing that the liberty granted to the petitioner should not set a precedent.In conclusion, the judgment addressed the various legal issues raised by the petitioner regarding the amendment to the VAT Act, classification of goods, legislative competence, and interpretation of tax imposition. The Court provided a pathway for the petitioner to seek redressal through the Appellate Tribunal while ensuring a fair process and withholding tax recovery pending the Tribunal's decision.
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