2018 (4) TMI 1633 - HC - VAT and Sales Tax

Court affirms decision on industrial classification, upholds VAT liability.

The Court affirmed the Single Judge's decision, dismissing the appeal due to the appellant's failure to prove the cable's industrial classification, ... Classification of goods - Rate of tax - cable - whether taxable at the rate of 12.5% chargeable for 'cable' or taxable at the rate of 4%, which the appellant had paid declaring the goods as 'industrial cable' - Chhattisgarh Value Added Tax Act, 2005 - Burden of proof - Held that:- Section 14 of the Act, 2005 concerning burden of proof. The language employed in the provision is plain and simple that the burden of proof in support of the claim for lower rate of tax is on the dealer/assessee. In view of this provision, the learned Single Judge has rightly held that the appellant having failed to satisfy the Assessing Officer during reassessment proceeding or the revisional authority or even before this Court that the cables used by it were industrial cables, the appellant is liable to pay tax at the rate of 12.5% - Curiously, the certificate has not been issued by the manufacturer himself, therefore, the manufacture is not claiming the cable produced by him to be industrial cable. Merely because some cable is used in raising an industry it would not make the cable as industrial cable because the same involves manufacturing with specifications to be used only in industrial activity. The appellant has, thus, failed to satisfy the authorities that the cable used by it is industrial cable - appeal dismissed - decided against appellant. Issues:Challenge to revisional order on Value Added Tax rate for cable purchase.Analysis:The appellant contested an order revising the Value Added Tax (VAT) rate for cable purchase. The dispute arose when an audit revealed that the appellant paid tax at 4% for industrial cable, but authorities claimed it should be 12.5% for simple cable. The Single Judge dismissed the petition due to lack of evidence proving the cable was industrial. The appellant argued against lack of hearing opportunity at the revisional level. The State reiterated its stance.The Chhattisgarh Value Added Tax Act, 2005, places the burden of proof on the dealer regarding tax liability. The Act specifies tax rates for goods in Schedule II. The appellant did not dispute tax liability but contested the applicable rate (4% or 12.5%) for the cable purchased. The appellant failed to prove the cable's classification under Entry No.61 of Schedule II as industrial cable.The audit report revealed the discrepancy in tax payment for cables purchased from M/s Paramount Communications Limited. The Additional Commissioner remitted the matter back for re-examination, emphasizing the burden of proof on the department. Despite a hearing opportunity, the assessing authority upheld the 12.5% tax rate in the subsequent order.The appellant presented a certificate from a Chartered Engineer stating the cable's industrial use. However, the certificate lacked manufacturer endorsement, crucial for claiming industrial cable status. Mere industrial use does not define a cable as industrial; specific manufacturing specifications are required. As the appellant failed to prove the cable's industrial nature, the Single Judge's decision upholding the 12.5% tax rate was deemed appropriate.In conclusion, the Court affirmed the Single Judge's decision, dismissing the appeal for lack of merit. The appellant's failure to establish the cable's industrial classification led to the liability for 12.5% VAT on the cable purchase.