2018 (5) TMI 1105 - HC - VAT and Sales Tax

Court affirms VAT classification for paving blocks, curb stones. Assessee wins appeal on composition scheme eligibility.

State of Gujarat Versus Super Tiles And Marbles Pvt Ltd.

The court upheld the Tribunal's classification that interlocking paving blocks and curb stones fall within entry 10(1) of Schedule II to the Gujarat Value ... Classification of goods - interlocking paving blocks and curb stones - Whether the Tribunal was right in holding that interlocking paving blocks and curb stones are bricks falling within entry 10(1) of Schedule II to the Gujarat Value Added Tax Act, 2003 and should be taxed accordingly? Held that: - Entry 10(1) of the schedule II to the VAT Act includes bricks of all kinds including fly ash bricks, refractory bricks, eco bricks and hollow block bricks. In plain terms, the intention of the legislature is thus to include all kinds of bricks within the fold of this entry. The entry is consciously and advisably worded widely - The bricks as understood in common usage and parlance need not require any description. Use of the paver blocks also in the recent times has become quite common. From the literature provided by the counsel for the parties, we gather that such interlocking paver blocks are made of concrete. They are used for making footpaths, used in gardens, passenger waiting areas, busstops and such other public places. These are prefabricated systematic blocks of definite sizes and shapes mostly come with self interlocking patterns. The paver blocks are also sometimes referred to as paver bricks. They are getting increasingly more popular for ground paving purpose. They are used predominantly in paving footpaths, gardens, sidewalks, busstops and other public places. These paver bricks are superior to the conventional bricks in number of ways including the durability, the ease of laying and removing. With the use of combination of shapes and colours, they can also be used for beautifying the place. One of the major advantages in use of these material is that these bricks are easy to remove enabling easy underground repair work. The Tribunal was correct in coming to the conclusion that paver blocks and curb stones are classifiable within entry 10(1) of Schedule II to the Gujarat Value Added Tax Act - appeal allowed - decided against Revenue. Issues Involved:1. Classification of interlocking paving blocks and curb stones under the Gujarat Value Added Tax Act, 2003.2. Eligibility for composition of tax under section 14A of the Gujarat Value Added Tax Act, 2003.Detailed Analysis:1. Classification of Interlocking Paving Blocks and Curb Stones:- Substantial Question of Law: Whether interlocking paving blocks and curb stones fall within entry 10(1) of Schedule II to the Gujarat Value Added Tax Act, 2003, and should be taxed accordingly.- Background: The respondent, trading in interlocking paving blocks and curb stones, sought determination under section 80 of the VAT Act. The Determining Authority classified these products under the residuary entry at a higher tax rate, not as bricks.- Tribunal's Decision: The Tribunal held that interlocking paving blocks and curb stones are bricks under entry 10(1) of Schedule II to the VAT Act.- Arguments:- Revenue: Argued that the dictionary meaning and common parlance understanding of bricks differ from paver blocks, which are used for different purposes and made from different materials.- Assessees: Contended that entry 10(1) is widely worded to include all kinds of bricks, and new uses and meanings of products should be considered.- Court's Analysis:- Entry 10(1) of Schedule II: Includes 'bricks of all kinds' and is intended to be widely inclusive.- Common Usage: Paver blocks, made of concrete, are used for paving footpaths, gardens, and public places. They are sometimes referred to as paver bricks and have overlapping uses with conventional bricks.- Legal Precedents: The court referred to various judgments emphasizing that specific entries should be preferred over residuary entries and that common parlance should guide the interpretation.- Conclusion: The court upheld the Tribunal's classification, stating that paver blocks and curb stones fall within entry 10(1) of Schedule II to the VAT Act, thereby dismissing the Revenue's appeal.2. Eligibility for Composition of Tax:- Substantial Question of Law: Whether the Tribunal rightly held that the assessee was entitled to the composition scheme under section 14A of the VAT Act.- Background: The assessee utilized self-manufactured paver blocks in a construction contract and sought the benefit of the composition scheme.- Determining Authority's Decision: Denied the benefit, stating that the goods used in the works contract did not bear tax.- Tribunal's Decision: Held that the requirement was that the goods used should have borne tax, not necessarily the transfer of property.- Court's Analysis:- Interpretation of Rule 28(8): The court referred to a recent judgment in BSCPL Infrastructure Limited v. State of Gujarat, which clarified that a dealer must have paid tax upon consumption of taxable goods, but not if the tax liability did not arise.- Self-Manufactured Goods: The court noted that there is no provision debarring a dealer from using self-manufactured inputs in execution of works contracts.- Conclusion: The court affirmed the Tribunal's decision, allowing the benefit of the composition scheme to the assessee and answering the question in favor of the assessee.Final Judgment:- Both tax appeals were dismissed, with the court ruling in favor of the assessees on both issues. The classification of interlocking paving blocks and curb stones under entry 10(1) of Schedule II was upheld, and the eligibility for the composition scheme under section 14A was affirmed.