2022 (3) TMI 931 - HC - VAT and Sales Tax

Court Upholds Classification of 'Huggies' for Sales Tax, Ruling on Trade Discount and Turnover Enhancement

M/s. Hindustan Lever Ltd., Versus State of Orissa, represented through the Commissioner of Sales Tax, Orissa

M/s. Hindustan Lever Ltd., Versus State of Orissa, represented through the Commissioner of Sales Tax, Orissa - TMI Issues: Classification of product for sales tax, Claim for deduction of trade discount, Alleged purchase suppression, Tax adjustment on goodsClassification of product for sales tax:The issue revolves around the classification of the product 'huggies' for sales tax purposes. The Assessee argued that huggies should be classified under 'Hosiery goods and Readymade garments' and taxed at 4%. However, the Assistant Commissioner of Sales Tax (ACST) classified huggies as sanitary napkins, subject to 12% tax. The Tribunal upheld the ACST's view. The Court rejected the Assessee's contention, stating that huggies cannot be considered as 'readymade garments' and upheld the classification under sanitary napkins. The Court ruled in favor of the Department, affirming the Tribunal's decision.Claim for deduction of trade discount:The Assessee claimed a deduction for trade discount, citing a Supreme Court decision supporting their stance. The Tribunal accepted the plea but upheld the Sales Tax Officer's decision to deny the deduction. The Court found the Tribunal's conclusion internally illogical and ruled in favor of the Assessee, stating that the Tribunal was not justified in denying the trade discount deduction.Alleged purchase suppression:Regarding alleged purchase suppression, the Assessee failed to produce evidence for one container out of 45 consignments sent via branch transfer. The turnover was enhanced by the AO, ACST, and Tribunal, treating it as 'fraud'. The Court deemed the 10 times enhancement disproportionate and reduced it to 5 times the turnover, modifying the assessment order accordingly.Tax adjustment on goods:The Department refused to adjust tax paid on tricycle, freezer, pushcart, and stabilizer against the admitted tax payable, citing the absence of these items in the Registration Certificate (RC). The Assessee argued for adjustment under the OST Rules. The Court upheld the Department's decision, stating that unless these items are specifically mentioned in the RC, the adjustment rule does not apply. The Court ruled against the Assessee, affirming the AO and Tribunal's findings.The revision petition was disposed of with the Court's rulings on each issue, providing detailed analysis and legal reasoning for each decision.