2011 (6) TMI 657 - HC - VAT and Sales Tax

Court clarifies plastic footwear classification: must be entirely plastic. Appeal allowed, ruling in favor of Appellant.

COMMISSIONER OF SALES TAX Versus DEV ENTERPRISES LIMITED

COMMISSIONER OF SALES TAX Versus DEV ENTERPRISES LIMITED - 2011 (272) E.L.T. 163 (Bom.) , [2011] 42 VST 504 (Bom) Issues Involved:1. Interpretation of Schedule Entry C-74 regarding plastic footwear.2. Classification of the product 'Escort 111 SYN Black' under Entry C-74.Issue-wise Detailed Analysis:1. Interpretation of Schedule Entry C-74 regarding plastic footwear:The primary issue was whether Entry C-74, which refers to 'plastic footwear,' should be interpreted to mean footwear predominantly made of plastic or exclusively made of plastic. The Commissioner of Sales Tax held that to classify under Entry C-74, the product must be entirely made of plastic and moulded. The Tribunal, however, construed that the footwear predominantly made of plastic would suffice for the classification under Entry C-74. The Tribunal relied on the certificates from the Footwear Design and Development Institute (FDDI), which stated that 90% of the material used in the manufacture of the footwear is plastic. The Tribunal's decision was challenged, arguing that the plain and literal meaning of the entry should be applied, and only footwear made entirely of plastic should fall under Entry C-74.2. Classification of the product 'Escort 111 SYN Black' under Entry C-74:The Respondent contended that their product, 'Escort 111 SYN Black,' should be classified under Entry C-74 as it is predominantly made of plastic. The Commissioner determined that the product did not meet the criteria for classification under Entry C-74 as the shoe upper was made of plastic-coated fabric, not entirely plastic. The Tribunal, however, accepted the Respondent's contention and classified the product under Entry C-74 based on the predominance of plastic in the material composition. The Appellant argued that the classification should be based on the plain meaning of the entry, and since the product was not entirely made of plastic, it should not be classified under Entry C-74.Detailed Judgment Analysis:Interpretation of Schedule Entry C-74:The Court emphasized that the entry 'plastic footwear' must be construed as it stands, without adding words like 'predominantly' to the interpretative process. The Court noted that the MVAT Act did not adopt the Harmonized System of Nomenclature (HSN) or the explanatory notes thereto, unlike the Central Excise Tariff. The Court referred to several Supreme Court judgments, including *Geep Flashlight Industries Ltd. v. Union of India* and *Wiltech India Ltd. v. Collector of Central Excise*, which held that an article made of plastic must be wholly made of plastic, not a combination of plastic and other materials. The Court concluded that the Tribunal erred in applying the test of predominance and that the product must be entirely made of plastic to fall under Entry C-74.Classification of 'Escort 111 SYN Black':The Court examined the certificates and material produced by the Respondent, which indicated that the upper part of the footwear was made of plastic-coated fabric, not entirely plastic. The Court reiterated that the explanatory notes to the Central Excise Tariff could not be used to interpret the MVAT Act. The Court agreed with the Karnataka High Court's decision in *Preston India Pvt. Ltd. v. State of Karnataka*, which held that footwear with an upper part made of man-made fabric with a plastic coating could not be classified as plastic footwear. The Court concluded that the product 'Escort 111 SYN Black' did not qualify as plastic footwear under Entry C-74 as it was not entirely made of plastic.Conclusion:The Court allowed the appeal, holding that the Tribunal was not justified in construing Schedule Entry C-74 to mean footwear predominantly made of plastic. The product 'Escort 111 SYN Black' did not fall under Entry C-74 as it was not wholly made of plastic. The Court answered both questions of law in the negative and ruled in favor of the Appellant, with no order as to costs.