2023 (9) TMI 1419 - HC - VAT and Sales Tax

Gas mixtures with Argon, Carbon Dioxide, Oxygen classified under Industrial Inputs Entry 35 of RVAT Act

Linde India Limited Versus The Assistant Commissioner, Anti Evasion-Rajasthan, Circle-I

Rajasthan HC held that gas mixtures containing Argon, Carbon Dioxide, Oxygen, Hydrogen, and Carbon gases fall under Entry No. 35 of Schedule-IV ... Classification of goods - Whether specific entry no.35 of Schedule-IV do not cover the 'Argon Carbon Dioxide, Oxygen, Hydrogen, Carbon gases as 'Other non metals? - HELD THAT:- It is quite apparent that gases involved in the products in question are individually covered under Entry No. 35 of Part B of Schedule IV to the RVAT Act. Whether a combination/mixture of these gases, which are individually covered, can be ousted from the said Entry? - HELD THAT:- It cannot be emphasized enough that in indirect tax matters, long standing classification cannot be disturbed merely on personal opinion/knowledge. The revenue has to discharge its burden to prove that the change in classification is warranted and necessary by adducing cogent and corroborating evidence. Mere assertion or personal opinion, even of the Commissioner, without any supporting evidence is of no use or value. Since the revenue has not discharged its burden to show that the products in question, i.e. mixture of the gases which are individually covered under Entry No. 35 ('Industrial Inputs'), would not be covered in the broad Entry No. 35 of Part B ('Industrial Inputs') of Schedule IV to the RVAT Act, the levy of additional tax and interest cannot be sustained. The question of law framed have to be answered in favour of the petitioner- assessee and against the respondent-revenue. All STR allowed. Issues Involved:1. Classification of gases under Entry No. 35 of Schedule IV of the RVAT Act.2. Validity of the Clarification dated 03.08.2017 issued by the Commissioner.3. Burden of proof for classification change.4. Binding nature of departmental clarifications on judicial/quasi-judicial bodies.Summary:1. Classification of Gases:The issue revolves around whether gases such as Argon, Carbon Dioxide, Oxygen, and Hydrogen, when mixed, should be classified under Entry No. 35 of Schedule IV of the RVAT Act as 'Industrial Inputs' or under a residual entry attracting higher tax. The petitioner-assessee, engaged in the manufacture and sale of various industrial gases, had classified these gases under Entry No. 35 for over 11 years. However, following a survey on 21.12.2016, the respondent-revenue reclassified these gases under Entry No. 78 of Schedule V (residual entry) until 13.07.2014 and under Entry No. 29 of Schedule V from 14.07.2014, both attracting a tax rate of 14.5%.2. Validity of Clarification Dated 03.08.2017:The reclassification was based on a Clarification dated 03.08.2017 issued by the Commissioner, which stated that when non-metals are mixed to form compounds or mixtures, they are not covered by Entry No. 35. The court noted that this clarification was issued after the repeal of the VAT Act and was not supported by any technical or expert opinion. The court emphasized that long-standing classifications cannot be disturbed based on personal opinions without supporting evidence.3. Burden of Proof for Classification Change:The court held that the burden of proof to show that a product falls within a particular tariff is always on the revenue, especially when attempting to classify products under a residual entry instead of a specific entry. The respondent-revenue failed to provide any expert or technical evidence to support their reclassification, relying solely on the Commissioner's clarification.4. Binding Nature of Departmental Clarifications:The court highlighted that departmental circulars or clarifications are not binding on judicial or quasi-judicial bodies. The reliance on the Clarification dated 03.08.2017 by the Appellate Authority and the Tax Board was deemed erroneous as these bodies discharge quasi-judicial/judicial functions. The court also noted that a clarificatory circular can be applied retrospectively only if it is beneficial to the assessee.Conclusion:The court answered the question of law in favor of the petitioner-assessee, quashing the impugned orders of the Tax Board and the authorities below. The long-standing classification of the gases under Entry No. 35 of Schedule IV as 'Industrial Inputs' was upheld, and the levy of additional tax and interest was set aside. Pending applications, if any, were disposed of.