2019 (7) TMI 477 - HC - VAT and Sales Tax

Challenged tax liability on paver bricks upheld by Supreme Court with opportunity for further appeal

M/s. Nidhi Interlock Pavers Versus State of Karnataka Thorugh Its Principal Secretary Finance Department, The Commissioner of Commercial Taxes

M/s. Nidhi Interlock Pavers Versus State of Karnataka Thorugh Its Principal Secretary Finance Department, The Commissioner of Commercial Taxes - TMI Issues:Challenge to reassessment orders under KVAT Act for tax liability on paver bricks at 14.5% based on Division Bench decision.Analysis:The petitioners challenged reassessment orders under the KVAT Act for tax liability on paver bricks at 14.5% based on a Division Bench decision. The petitioners, engaged in manufacturing paver bricks, contested the classification of paver bricks under the residuary entry taxable at 14.5%. The petitioners argued that the Division Bench ruling levying VAT at 14.5% on paver bricks is unsustainable, citing a Supreme Court decision allowing the assessee to approach statutory authorities independently. The Revenue contended that the Division Bench ruling was not set aside by the Supreme Court, and the statutory Authority re-examined the issue independently, concluding that paver bricks are taxable at 14.5% under the residuary entry.The main controversy revolved around whether paver bricks should be taxed under the residuary entry or at a lower rate under a specific entry of the KVAT Act. Entry No.2 of the III schedule to the KVAT Act encompassed various types of bricks, including fly ash bricks and earthen tiles. The Division Bench had previously analyzed this issue in the case of M/s H.H.Cement Products, emphasizing the application of the 'Common parlance test' in interpreting entries. The Division Bench ruling was not overturned by the Supreme Court, as the assessee was permitted to withdraw the appeal and approach statutory Authorities independently. Therefore, the argument that the Division Bench ruling was nullified by the Supreme Court was dismissed.In conclusion, the petitioners were directed to approach the statutory Authorities and present additional evidence to support their claim. They were granted four weeks to file an appeal, and the statutory Authorities were instructed to decide the appeal without being influenced by the Division Bench decision, ensuring an independent assessment in accordance with the law. The writ petitions were disposed of with these observations and directions.