2025 (5) TMI 935 - HC - VAT / Sales Tax

Fitness Equipment Classified as Sports Goods, Eligible for Concessional 5% Tax Rate Under Entry-60

M/s Acme Fitness Pvt. Ltd. Versus The State Of AP and Others

The SC examined the classification of fitness equipment under the A.P. VAT Act, focusing on Entry-60 for sports goods. The court broadly interpreted ... Eligibility for concessional rate of 2% - necessary C-Forms and F-forms have not been filed - goods would fall under entry 60 of the IVth Schedule, to the A.P.VAT Act, attracting tax at the rate of 5% or to be treated as unspecified goods under Schedule-V, which would be amenable to tax at the rate of 14.5%? - HELD THAT:- Weight lifting equipment, is connected to the sport of weight lifting and would therefore qualify to be treated as sports goods, even according to the interpretation placed by the 5th respondent that only goods which are directly associated with a sport can be treated as sports goods. The other goods, such as treadmill, dumbbells, rotators and fit-kit exercise kit cannot be associated with any one specific sport. However, the fact remains that every sports person has to maintain physical fitness and the goods mentioned are used for maintaining such physical fitness. In such circumstances, the goods mentioned above would also answer the description of sports goods as these goods are needed by sports persons to maintain themselves physically and to achieve the necessary physical fitness to participate in any physical sport. Conclusion - The petitioner's goods qualify as sports goods under Entry-60 of Schedule-IV, attracting a concessional tax rate, and the assessment orders denying this classification are set aside with directions for fresh assessment accordingly. The matters are remanded back to the Assessing Officer for passing fresh orders, after treating the goods in question, as goods falling within Entry-60 of Schedule-IV to the A.P. VAT Act - Petition allowed by way of remand. The core legal questions considered by the Court in these writ petitions pertain to the proper classification of certain goods sold by the petitioner under the Andhra Pradesh Value Added Tax (A.P. VAT) Act and the consequent applicable rate of tax. Specifically, the issues were:Whether the goods sold by the petitioner, comprising gym equipment such as weight lifting equipment, dumbbells, treadmills, rotators, and fit-kit exercisers, fall within Entry-60 of Schedule-IV of the A.P. VAT Act, which covers 'Sports goods excluding apparels and footwear,' and thus attract a concessional tax rate of 5%.Whether the petitioner was eligible to pay tax at the concessional rate given the absence of requisite C-Forms and F-forms, as contended by the Revenue.The validity and applicability of prior Government Orders (G.O.s) relying on HSN Codes for classification of goods under the A.P. VAT Act, especially in light of the repeal of such G.O.s.The interpretation of the term 'sports goods' in the context of fitness equipment not directly associated with any specific sport.Issue-wise Detailed Analysis1. Classification of Goods under Entry-60 of Schedule-IV of the A.P. VAT ActLegal Framework and Precedents: Entry-60 of Schedule-IV to the A.P. VAT Act provides for 'Sports goods excluding apparels and footwear,' attracting a concessional tax rate of 5%. Earlier, classification was guided by HSN Codes under the Central Excise Act, specifically HSN Code-9506, which included articles and equipment for general physical exercise under sports equipment. However, G.O.Ms.No.1615 dated 31.08.2013, which relied on HSN Codes, was repealed by G.O.Ms.No.140 dated 19.03.2013, removing reliance on HSN Codes for classification.Court's Interpretation and Reasoning: With the repeal of the Government Order relying on HSN Codes, the Court undertook a de novo consideration of whether the goods in question fall within Entry-60. The Court accepted the Revenue's interpretation that only goods directly associated with a specific sport qualify as sports goods but expanded this understanding.The Court held that weight lifting equipment clearly relates to the sport of weight lifting and thus qualifies as sports goods under Entry-60. For other items such as treadmills, dumbbells, rotators, and fit-kit exercisers, which are not linked to any specific sport, the Court reasoned that these are essential for maintaining physical fitness, which is a prerequisite for participation in any sport. Therefore, these goods also fall within the ambit of sports goods.Key Evidence and Findings: The petitioner's goods included weight lifting equipment and other fitness apparatus. The Court relied on the nature of these goods and their use by sports persons to maintain fitness, thereby qualifying them as sports goods.Application of Law to Facts: The Court applied the legal definition of sports goods and the purpose of the goods to conclude that the petitioner's goods fall under Entry-60, attracting the concessional tax rate.Treatment of Competing Arguments: The Revenue argued that the goods were general fitness equipment not related to any specific sport and thus could not be classified under Entry-60. The Court rejected this narrow interpretation, emphasizing the functional connection of fitness equipment to sports participation.Conclusions: The Court concluded that all goods sold by the petitioner, including general fitness equipment, qualify as sports goods under Entry-60 of Schedule-IV.2. Eligibility for Concessional Tax Rate in Absence of C-Forms and F-FormsLegal Framework and Precedents: The Revenue denied the concessional tax rate of 2% under the State Act due to the petitioner's failure to file the necessary C-Forms and F-Forms, which are statutory documents evidencing inter-state sales and eligibility for concessional tax rates under the Central Sales Tax Act.Court's Interpretation and Reasoning: The Court did not expressly delve into the procedural aspects of form filing but focused on the classification issue that determines the applicable tax rate under the State Act. The assessment orders were set aside and remanded for fresh consideration treating the goods as falling under Entry-60, thereby attracting the concessional rate of 5% under the A.P. VAT Act.Key Evidence and Findings: The absence of C-Forms and F-Forms was a ground for the Revenue to deny concessional rates, but the Court's decision to remand for reassessment indicates that classification takes precedence in determining applicable tax rates.Application of Law to Facts: The Court's order implies that the petitioner's eligibility for concessional rates must be reconsidered in light of the correct classification of goods.Treatment of Competing Arguments: The Revenue's procedural objection on form filing was not upheld as a bar to concessional classification.Conclusions: The Court remanded the matters for fresh assessment after classifying the goods under Entry-60, implicitly allowing the petitioner to claim concessional rates subject to compliance with procedural requirements.3. Validity of Reliance on HSN Codes for ClassificationLegal Framework and Precedents: G.O.Ms.No.1615 dated 31.08.2013 had relied on HSN Codes for classification, but this was repealed by G.O.Ms.No.140 dated 19.03.2013.Court's Interpretation and Reasoning: The Court held that post repeal, no reliance can be placed on HSN Codes for classification under the A.P. VAT Act. Consequently, classification must be determined on the basis of the description and nature of goods themselves.Key Evidence and Findings: The repeal of the Government Order was a matter of record, and the Court emphasized the need for independent classification without reliance on HSN Codes.Application of Law to Facts: The Court applied this principle to reject the Revenue's reliance on HSN-based classification and undertook its own analysis.Treatment of Competing Arguments: The petitioner relied on prior HSN-based classification, but the Court clarified that such reliance is no longer valid.Conclusions: Classification must be made afresh based on the intrinsic nature of the goods.4. Interpretation of 'Sports Goods' to Include Fitness EquipmentLegal Framework and Precedents: The Court relied on the judgment of the Hon'ble High Court of Uttarakhand at Nainital in Commercial Tax Revision No.12 of 2013 and the Allahabad High Court judgment in Cosco Industries Ltd. vs. State of U.P., which held that fitness equipment and exercise apparatus qualify as sports goods.Court's Interpretation and Reasoning: The Court adopted the reasoning that fitness equipment, even if not associated with a specific sport, is essential for sports persons to maintain physical fitness and thus falls within the scope of sports goods.Key Evidence and Findings: The Court noted that the goods in question are used by sports persons for physical fitness, which is integral to sports participation.Application of Law to Facts: The Court applied these precedents to the facts, thereby broadening the definition of sports goods.Treatment of Competing Arguments: The Revenue's narrow interpretation was rejected in favor of a purposive interpretation consistent with judicial precedents.Conclusions: Fitness equipment is to be treated as sports goods under Entry-60.Significant Holdings'Weight lifting equipment, is connected to the sport of weight lifting and would therefore qualify to be treated as sports goods, even according to the interpretation placed by the 5th respondent that only goods which are directly associated with a sport can be treated as sports goods.''The other goods, such as treadmill, dumbbells, rotators and fit-kit exercise kit cannot be associated with any one specific sport. However, the fact remains that every sports person has to maintain physical fitness and the goods mentioned are used for maintaining such physical fitness. In such circumstances, the goods mentioned above would also answer the description of sports goods as these goods are needed by sports persons to maintain themselves physically and to achieve the necessary physical fitness to participate in any physical sport.''In that view of the matter, all the writ petitions are allowed and the orders of assessment, set out above, are set aside. The matters are remanded back to the Assessing Officer for passing fresh orders, after treating the goods in question, as goods falling within Entry-60 of Schedule-IV to the A.P. VAT Act.'The Court established the core principle that the classification of goods as sports goods under the A.P. VAT Act should be guided by the functional use and connection to sports activities, not merely by association with a specific sport or reliance on repealed Government Orders based on HSN Codes. The final determination was that the petitioner's goods qualify as sports goods under Entry-60 of Schedule-IV, attracting a concessional tax rate, and the assessment orders denying this classification were set aside with directions for fresh assessment accordingly.