TaxTMI 
TaxTMI 
2012 (10) TMI 450
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....missioner of Taxes, Assam (Commissioner) under section 105 of the Assam Value Added Tax Act, 2003 (Act) on a petition filed by the Superintendent of Taxes, Guwahati, Unit-B seeking clarification on the rate of tax on "Ujala Supreme" manufactured by the petitioner. 4. Case as projected in the writ petition is that respondent is engaged in the business of making and selling of "Ujala Supreme" (product), which is the brand name for diluted Acid Violate Paste (AVP). It is a dealer under the Act and has been filing returns for the product in accordance with the provisions of the Act and the Rules framed thereunder by classifying it under HSN Code No.3204 12 94, paying value added tax (VAT) @4% in terms of part-C of second schedule to the Act and in turn collecting the said amount from its consumers. 5. Respondent was issued an audit assessment notice dated 21-05- 2007 u/s 36 of the Act asking it to produce documentary evidence in support of the returns filed by it for the period 01-05-2005 to 31-03-2006. It complied with the notice and submitted the necessary documents and details. Thereafter, a show cause notice dated 25-06-2007 was issued by the concerned Superintendent of Ta....
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....turing process and is only a dilution of AVP alone. According to the department, the product marketed by the respondent is understood as a fabric whitener which is distinctly different from AVP, which is known in the market as synthetic organic dye used for dyeing of fabrics of silk wool at elevated temperature in the presence of acid. The department placed reliance on a judgment of the Kerala High Court in the case of M.P. Agencies -vs- State of Kerala reported in (2010) 28 VST 44 (Ker) and contended that the product is commercially different from AVP and even assuming that it is diluted AVP, as the product contains 99.02@ of water, it is completely transformed in identity, use and marketability, thus it ceases to be a dye. Therefore, the rate of tax applicable on synthetic organic dye used for dyeing fabrics of silk wool was not applicable to the product. Respondent's classification of the product at Entry No.114 of part-C of the 2nd schedule to the Act was disputed as erroneous. 8. Learned Single Judge after due consideration held that the product is nothing but a diluted form of AVP and is entitled to be catalogued in Entry No.114 of schedule II C to the Act with correspondi....
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....on of Entry 114 of schedule-II C with corresponding heading No. of 32.04 in the Central Excise Tariff Act, 1985 is as under :- "Synthetic organic colouring matter, whether or not chemically defined; preparations based on synthetic organic colouring matter as specified in Note 3 of Chapter 32 of the First Schedule of the Central Excise Tariff Act, 1985; synthetic organic products of a kind used as fluorescent brightening agents or as luminophores, whether or not chemically defined excluding catechu or gambiar." 15. All residuary items are placed in the 5th schedule attracting rate of tax at 12.5%. 16. The order of the Commissioner dated 11-08-2010 appears to be wholly based on the decision of the Kerala High Court in M.P. Agencies (supra). 17. In the Kerala case it was held that in the product "Ujala Supreme", acid violet was present in less than 1% and that the balance 99% was water. The Kerala High Court upheld the finding of the jurisdictional Commissioner that "Ujala Supreme" is a finished product used as a fabric whitener, emerging from the application of the industrial input i.e. AVP and that "Ujala Supreme" as a product was completely distinct from AVP. 18. We ....
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.... Certificate and the Certificate of Entitlement with the particulars furnished therein thus have to be judged in these perspectives. The facts pertaining to the commencement of commercial production and the manufacture of finished products were predominantly for the purpose of determining the eligibility of the units engaged therein to avail the benefits under the policy. The focus invariably was not on the actual process of manufacture of the goods. Though the petitioner's present plea that Ujala Supreme is intrinsically only a diluted AVP is irreconcilable with the amalgam of the raw materials applied for the manufacture thereof as enumerated in its application for obtaining the aforementioned certificates, in the estimate of this Court this incompatibility ipso facto, does not render the issue raised herein non examinable on the ground of lack of its bonafide. Such a contradiction though may expose the petitioner to steps contemplated in law by the appropriate authorities, the consequence of if being non-suited therefore vis a vis the present challenge does not ensue. If in fact, the product Ujala Supreme is only singularly diluted AVP to its extreme with no other constitu....
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....he observations of the HPTLC analysis are as follows. a. All the components present in diluted sample of AVP are also present in Ujala sample. b. No additional components are present in Ujala Sample. c. The diluted AVP samples and the Ujala sample's spectral scans are super imposable and match exactly, which confirms that Ujala is a diluted form of AVP and chemically they both are identical. From the above analytical and technical data, it can be concluded that "Ujala" is only a diluted form of Acid Violate 49 with water, which has the inherent characteristics of brightening clothes and does not contain any other additives or optical brightening agents. The brightness of the fabric is increased because it absorbs all the colours in the visible light and transmits the bluish / purplish tint, thus hiding the yellowing of the fabrics". 24. The above extract recites the following features of the analysis of the product - (1) The chemical compositions of AVP and Ujala are the same. (2) Ujala is heavily diluted form of AVP with water. (3) All the components present in diluted sample of AVP also exist in Ujala. (4) No additional component is present in Ujala....
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....ations based on colouring matter of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations. This head Note, however, does not apply to pigments dispersed in non-aqueous media, in liquid or paste form, of a kind used in the manufacture of paints, including enamels or to other preparations of heading 3212 etc." " 30. Noticeably, the argument on behalf of the respondents that Ujala Supreme even if a dye, being offered for sale in form or packing for retain sale, is covered by heading 3212 is not based on pleadings. Such a plea is instead opposed to the stance of the respondents that the product is shorn of any dyeing attribute. Be that as it may, as the product is a composition of two constituents as demonstrated by its composition, Rule 3(b) of the General Rules for Interpretation of the Harmonized System seems apposite to diagnose with certitude, its classification to ascertain the rate of its exigibility to duty under the Tariff Act. Judged by the percentage of existence of the ingredients of the product, it cannot be gainsaid that the essential characteristics thereof would be decided by Acid Violate Paste (AVP). As it is Rule....