Dismissed

The State of Tamil Nadu v. Tvl.the Tamil Nadu Industirial

Madras HC1 Jun 2016TC/11/2016

Case brief

AI extract

What is this about?

The High Court dismissed the Tax Case Appeal filed by the State against the Sales Tax Appellate Tribunal. The Court upheld the finding that rubberised coir products, including mattresses and pillows made with latex gum and coir, are taxable under Entry 24 of Part C of the Schedule at 5%, despite the use of polyurethane foam. The Court applied the precedent of State of Tamil Nadu v. Duroflex Coir I

What did the court decide?

The Tax Case Appeal was dismissed; no costs awarded.

The State of Tamil Nadu Vs Tvl.the Tamil Nadu… — Service and Employment | Madras HC (2016)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 01.06.2016

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CORAM:

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THE HONOURABLE MR.JUSTICE S.MANIKUMAR

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and

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THE HONOURABLE MR.JUSTICE D.KRISHNA KUMAR

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T.C.No.11 of 2016

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The State of Tamilnadu rep. by

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The Deputy Commissioner of Commercial Taxes, Tiruchirapalli Division, Tiruchirapalli.

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.. Petitioner

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versus

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Tvl.The Tamil Nadu Industrial Co-op. Rubberised Coir Products Ltd., Panayakkottai.

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.. Respondent

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Prayer: Tax Case filed under Section 38(1) of the Tamil Nadu General Sales Tax Act, 1959, against the order made in S.T.A.No.1061 of 2000, dated 18.07.2002 passed by the Tamilnadu sales Tax appellate Tribunal (Main Bench), Chennai 600 104 against the order made in AP ;No.208/97, dated 05.11.1999 passed by the Appellate Assistant Commissioner (CT), Thanjavur against the order passed by the Deputy Commercial Tax Officer II, Pattukottai dated 14.02.1997 and made in TNGST No.4180491/95-96 for the Assessment Year 1995-96.

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For Petitioner :Dr.Anitha Sumath,

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Special Government Pleader (Taxes)

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Challenge in this appeal is to the order made in S.T.A.No.1061 of 2000, dated 18.07.2002, passed by the Sales Tax Appellate Tribunal, Chennai.

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Facts leading to the present case are as follows: The respondent, Tamil Nadu Industrial Co-op. Rubberised Coir Products Ltd., Panayakkottai, is a dealer in “rubberised coir products”. Their business turnovers were subjected to tax under the Tamil Nadu General Sales Tax Act. For the year 1995-

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96, they have reported a total and taxable turnover of Rs.1,59,52,497/- and Rs.1,59,52,497/-. During the check of accounts, the Assessing Officer has noticed the following defects, viz., (a) The dealers have failed to report the taxable turnover of Rs.49,089/- relating to the last purchase of Latex and to pay tax during the month of April' 1995; (b) There is difference in between the turnover reported and as per accounts; (c) The dealers have mingled the sales turnover under the Tamil Nadu General Sales Tax Act and Central Sales Tax Act, 1956, while rendering the monthly returns; and (d) The dealers have failed to disclose the taxable turnover of Rs.1066/- in the returns rendered (Sales of Empty Canes, Gunny Bags and Tender forms). In view of the above defects, the Assessing Officer determined the total and taxable turnover in the following manner,

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I Sales of Rubberised Coir products : Rs.53,82,044 at 12% I Sale of Rubberised Coir Bare Blocks : Rs.80,60,968 at 5% Last Purchase of Latex : Rs.14,06,628 at 5% I Sales of Empty Barrels, Cannes, Gunnies and Forms : Rs. 7,335 at 8% -----------------------Total taxable turnover : Rs.1,48,55,975/------------------------

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Invoking Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, the Assessing Officer imposed a penalty of Rs.8,543/-.

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Being aggrieved by the same, the respondent went on appeal before the Appellate Assistant Commissioner (CT), Thanjavur and after hearing the parties, by order, dated 05.11.1999, he has modified, as hereunder: “The rubberised coir product is liable to tax at the rate of 5% only as per Item No.24 of Part C of first schedule to the Tamil Nadu General Sales Tax, 1959, as per the clarification issued by the Commissioner of Commercial Taxes, in K.Dis.Acts.Cell.V.33102/97, dated 30.04.1997. Hence, the assessment made at 12% on the said turnover is hereby set aside and it is ordered that the said turnover of Rs.53,82,044/- relating to sale of rubberised coir products shall be assessed at 5% only under Item 24/Part C of First Schedule to the Tamil Nadu General Sales Tax, 1959. Consequent on the relief granted, there is excess payment, as per the assessment order and the question of levy of penalty does not arise. Hence, the penalty levied under Section 12(3)(b) is hereby set aside as not warranted.”

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Being aggrieved by the same, the State preferred an appeal in S.T.A.No.1061 of 2000, before the Tamil Nadu Sales Tax Appellate Tribunal, contending inter alia that,

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“the order of the first appellate authority is not at all correct; State contends that the respondent manufactured coir products, like mattresses, pillows, seat cusions, etc., using raw materials, such as, polyurethene from lated and other chemicals. It is contended on the side of the State that, respondent had manufactured rubberised coir bare blocks and with the above bare blocks and refines, etc., they manufactured mattresses and pillows and therefore, resultant products were rightly assessable for taxation at 12%. According to the State, the end products manufactured is not entirely coir based form and rexine are major ingredients of the end product manufactured mattresses and pillows and hence, the resultant products were rightly assessed at 12% by the assessing officer and therefore, finally pleaded for restoration of the order of the assessing officer in its entirety.”

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Adverting to the rival submissions, after going through the rival submissions, the Tribunal, while dismissing S.T.A.No.1061 of 2000, vide order, dated 18.07.2002, at Paragraphs 7 and 8, held as follows: “During argument, the learned Advocate for the respondent has filed a typed set of papers. In that, the Schedule entry part-C Item 24 and 38 were given. The clarification issued by the Commissioner and assessment order copies for 1992-93, 1993-94 and 199495 were also filed. The learned Advocate has also filed a copy of the Madras High Court's decision reported in 108 STC 484 and contended that the benefit of deduction in the rate of sales tax in respect of rubberised coir products under notification in G.O.P.303, dated 16.03.1981 is applicable to rubberised coir. No distinction between the products that were made by covering the block of rubberised coir with some other materials, in which, rubber is the predominant. It also used in that product. The learned Advocate has filed the raw materials required for the manufacture of rubberised coir mattress. On the other hand, the learned State Representative has contended that the dealer manufactured coir mattresses pillows, using raw material, such as, latex and other chemicals. They manufactured rubberised coir bare blocks. The end products is not entirely cash based

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but they are only rubber products assessable at a high rate.

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The Appellate Assistant Commissioner has given a finding that the Assessing Officer has viewed that rubberised coir products manufactured by the dealers as foam rubber products and levied tax at 12%. When the samples were produced, the Appellate Assistant Commissioner has found that it was made of coir fibre bound with latex gum and pasted with P.U. Foam purchased from registered dealers against Form.XVII. Before latexgum is used in the process of binding the coir fibre, it is called rubberised coir products and it could not be termed as foam rubber product. Going through the sample and also the relevant entry in First Schedule, under entry 24 of Part C and Item 38 of Part C, we quite agree with the learned Appellate Assistant Commissioner's findings. The Commissioner of Commercial Taxes has given a clarification for rubberised coir products are assessable under Item 24 only. It is only a consideration, whether it is a rubberised product or it is bare rubber. By going through the literature and the raw materials used in the manufacture, we find that the product manufactured by the dealer is only rubber coir mattress. The decision of the Hon'ble Madras High Court relied on is squarely applicable to the present case. The Hon'ble Madras High Court has held that there is no distinction between the products that they were made by covering a block of rubberised coir with other materials. By respectively following the Madras High Court's decision, we see no reason to interfere with the order of the learned Appellate Assistant Commissioner.”

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Order made in S.T.A.No.1061 of 2000, dated 18.07.2002, is sought to be revised, on the following questions of law,

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(i) The Tribunal erred in dismissing the State Appeal filed since during the Assessment year 1995-96, the dealers had manufactured pillows, mattresses using rubber, chemicals, coir and form and hence, the end product is not exclusively made of rubberised coir, but a form product and hence, the assessment made is quite in order.

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(ii) The Tribunal failed to note that the product of the dealers were rubberised coir product, eventhough the dealer had purchased and used polyurethane foam. Therefore, the view of the Tribunal is not acceptable.

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(iii) The Tribunal failed to note that for manufacture of rubberised coir product as laid down in Entry 24. Part C of the first schedule, the rubber latex and binding gum like chemicals and coir were used and there will be no use of polyurethane foam. Since the dealer uses polyurethane foam, the character of the product is a changed and hence, the product will fall under Entry 15 of Part E of the First Schedule.

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(iv) The Tribunal as well as the first appellate authority failed to note that the case law relied upon reported in 108 STC 484 related to rubberised coir products made of coir, rubber and chemicals, but in the instant case, polyurethane foam was purchased against Form XVII and used. Therefore, the raw materials used are entirely different from the one used in the case law reported. Further, the GOP.303, dated 16.03.1981 will apply to cases made of rubber, bonding gum latex and coir only. No foam was added and hence, the GOP is will not apply to the case. Moreover, the GOP which was relied on in the decision reported in 108 STC 484 was deleted with effect from 25.03.1989.

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(v) The Tribunal failed to note that the Commissioner's Clarification issued in 1999 is different from the one manufactured by the dealer. Further, during the year 1995-96, fibre foam products were classified under Entry 15 of Part-E of the First Schedule taxable at 12% and therefore, the Assessing Authority had rightly assessed the transactions besides levy of penalty.”

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Mrs.Dr.Anitha Sumath, learned Special Government Pleader (Taxes), appearing for the State raised the abovesaid grounds and sought for reversal. Going through the orders of both the Appellate Assistant Commissioner (CT), it is seen that after perusal of the rubberised coir products, like mattresses, pillows, seat cusions, etc., and at the time of hearing of the appeal, the appellate authority has found that the above goods is made, using coir fibre and latex gum, and pasted with P.U. Foam. However, on the basis of the finding of the appellate authority that foam has been purchased from registered dealers against Form.XVII and on the above, she contended that foam has also been used in the manufacture of pillows and cusion.

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The appellate authority has observed that, “Before latexgum is used in the process of binding the coir fibre, it is called rubberised coir products and it could not be termed as foam rubber product.” The Tribunal has perused the materials

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required for the manufacture of rubberised coir mattresses. Agreeing with the finding of fact, rendered by the Appellate Assistant Commissioner (CT) that merely because, the latex gum was used, in the process of binding the coir fibre, the end product cannot be termed as foam rubber product and following the decision of this Court in State of Tamil Nadu v. Duroflex Coir Industries Private Ltd., reported in 108 STC 484 and Notification in G.O.P.303, dated 16.03.1981, applicable to rubberised coir, the Tamil Nadu Sales Tax Appellate Tribunal has dismissed the appeal filed by the revenue.

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First of all, samples have been perused and the Appellate Assistant Commissioner has recorded a categorical finding that the product is only made of rubberised coir, taxable at 5%, which fact has been concurred by the Tribunal. Dispute is with reference to the assessment year 1995-96. No strong material grounds have been made out and therefore, this Court is not inclined to reverse the concurrence finding of fact recorded. Question of law raised is answered against the revenue and in favour of the assessee.

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In the result, the Tax Case Appeal is dismissed. No
costs.
Sd/-
Assistant Registrar(CS-II)
//True Copy//
Sub Assistant Registrar
skm
To
1. The Tamilnadu sales Income Tax Appellate Tribunal,
(Main Bench), Chennai 104.
2. The Appellate Assitant Commissioner (CT), Thanjavur.
3. The Deputy Commercial Tax Officer - II, Pattukottai.
4. The Deputy Commissioner or Commercial Taxes,
Tiruchirappalli Division, Tiruchirapalli.
5. The Secretary,
Central Board of Revenue, New Delhi.
T.C.No.11 of 2016
gr co
kra 22.06.2016

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The State of Tamil Nadu v. Tvl.the Tamil Nadu Industirial

Case brief

What is this about?

What did the court decide?

The State of Tamil Nadu v. Tvl.the Tamil Nadu Industirial

Case brief

What is this about?

What did the court decide?

What the court decided

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