Specific tariff entry prevails over residuary classification; bona fide dispute without concealment cannot sustain penalty.

Goods that squarely fit a specific schedule entry must be classified under that entry, and the residuary schedule applies only where no specific entry is attracted. On the facts, Ujala Supreme was treated as a diluted form of Acid Violet Paste and held to fall within the entry covering synthetic organic colouring matter and preparations based on such matter, not the residuary schedule. Once the specific classification was accepted, the higher residuary tax basis fell away. A bona fide classification dispute, without concealment or unrecorded sales, did not justify interest or penalty.

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Issues: (i) Whether the product "Ujala Supreme" was classifiable under Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Rajasthan Value Added Tax Act, 2003 as a preparation based on synthetic organic colouring matter, or was exigible to the residuary Schedule-V. (ii) Whether tax, interest, and penalty under Section 61 of the Rajasthan Value Added Tax Act, 2003 could be sustained when the dispute was only on classification and the assessee's claim for a specific entry was accepted.

Issue (i): Whether the product "Ujala Supreme" was classifiable under Entry 69, Sub-Entry 119 of Part-B of Schedule-IV of the Rajasthan Value Added Tax Act, 2003 as a preparation based on synthetic organic colouring matter, or was exigible to the residuary Schedule-V.

Analysis: The product was found to be a diluted form of Acid Violet Paste, with water as the only other ingredient. The Court noted that Entry 119 covers synthetic organic colouring matter and preparations based on such matter. It relied on the Supreme Court's treatment of the same product to hold that dilution with water does not create a commercially distinct new product and that classification must follow the specific entry when the goods answer its description. The Court also reiterated that resort to a residuary entry is permissible only when no specific entry is attracted.

Conclusion: The product was held to fall under the specific entry and not under the residuary Schedule-V, in favour of the assessee.

Issue (ii): Whether tax, interest, and penalty under Section 61 of the Rajasthan Value Added Tax Act, 2003 could be sustained when the dispute was only on classification and the assessee's claim for a specific entry was accepted.

Analysis: Once the product was held classifiable under the specific entry, the basis for higher tax under the residuary entry disappeared. On penalty, the Court held that a mere classification dispute does not amount to concealment, particularly where no unrecorded or unvouched sales were found. The existence of two possible views on classification also negatived penalty.

Conclusion: The tax demand on the higher residuary rate, as well as interest and penalty, were not sustainable, in favour of the assessee.

Final Conclusion: The petitions filed by the Revenue were dismissed, and the concurrent orders in favour of the assessee were left undisturbed.

Ratio Decidendi: Where goods squarely fit a specific tariff or schedule entry, the residuary entry cannot be invoked, and a bona fide classification dispute without concealment does not justify penalty.

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