2014 (4) TMI 805 - HC - VAT and Sales Tax

Court directs fresh consideration of Central Excise Tariff Act interpretation, sets prompt appeal decision timeline

HCL Comnet Ltd. Versus State of Karnataka

The court set aside the Tribunal's order and remanded the case for fresh consideration, directing the Tribunal to interpret the entries in the ... Claim of benefit under Entry 53 - Classification of VSATs - Whether Tribunal was justified in holding that VSATs are not covered by Entry 53 in the third schedule to the Karnataka VAT Act overlooking item No.5 in the Notification dated 06.04.2006 – Interpretation of Statute - Held that:- After carefully perusing Rules including general explanatory notes and examining the notification dated 6-4-2006 and also Entry No.53 of the third schedule to the Act this court has also gone through the impugned orders – There is substance in the submissions for assessee to the extent that the Rules for interpretation of the notification were not taken into consideration by the Tribunal - Tribunal did not interpret the entries in the table, as reflected in the notification dated 6-4-2006, in the light of these rules which provide for interpretation of the Notification – matter remanded back to tribunal - Decided in favour of assessee. Issues Involved:1. Classification of VSATs under the Karnataka Value Added Tax Act, 2003.2. Interpretation of relevant entries in the notification dated 06.04.2006.3. Examination of material on record regarding the turnover of the petitioner.4. Consideration of the rules for interpretation of the Central Excise Tariff Act, 1985.Issue-wise Detailed Analysis:1. Classification of VSATs under the Karnataka Value Added Tax Act, 2003:The primary issue is whether VSATs (Very Small Aperture Terminals) are covered by Entry 53 in the third schedule to the Karnataka Value Added Tax Act, 2003. The Tribunal and authorities below concluded that VSATs do not fall under Entry 53. The petitioner argued that VSATs should be classified under this entry based on the notification dated 06.04.2006 issued by the Government of Karnataka, which specifies IT products including telecommunication equipment. The judgment noted that the petitioner's case is not covered by an earlier notification dated 31.03.2006 under Sl.No.12 bearing Heading No.8529.10.2. Interpretation of relevant entries in the notification dated 06.04.2006:The petitioner contended that the Tribunal failed to interpret item 5 in the notification dated 06.04.2006 correctly. This item refers to sub-heading 8525.20 in the Central Excise Tariff Act, which includes transmission apparatus incorporating reception apparatus. The Tribunal did not consider the rules for interpreting the Central Excise Tariff Act, which should have guided the interpretation of the notification. The court emphasized the need to interpret the entries in the notification in light of the rules for interpretation provided in the Central Excise Tariff Act.3. Examination of material on record regarding the turnover of the petitioner:The petitioner questioned whether there was sufficient material on record to conclude that the entire turnover was through the sale of VSATs. The Tribunal upheld the Assessing Authority's order without interfering. The court did not delve deeply into this issue but implied that the Tribunal should reconsider the material on record when re-evaluating the case.4. Consideration of the rules for interpretation of the Central Excise Tariff Act, 1985:The judgment highlighted that the Tribunal did not apply the rules for interpretation of the Central Excise Tariff Act while examining the entries in the notification dated 06.04.2006. The court stressed that these rules and explanatory notes should guide the interpretation of the notification. The rules provide clarity on how headings, sub-headings, and tariff items should be read and understood. The court found merit in the petitioner's argument that the Tribunal overlooked these interpretative rules.Conclusion:The court set aside the Tribunal's order dated 21.06.2013 and remanded the case back to the Tribunal for fresh consideration. The Tribunal was directed to interpret the entries in the notification dated 06.04.2006 in light of the rules for interpretation of the Central Excise Tariff Act. The Tribunal was instructed to address only the questions formulated in the third paragraph of the judgment and decide the appeals expeditiously, preferably within six months. The petitioner was allowed to furnish a new bank guarantee for the remaining 15% of the total liability, with the Assessing Authority directed to return the earlier bank guarantee.Final Order:The Tribunal's order was set aside, and the appeals were restored for fresh consideration. The Tribunal was directed to interpret the notification correctly and decide the appeals within six months. The petitioner was permitted to replace the existing bank guarantee with a new one for the remaining liability.