The High Court examined whether MDF Boards manufactured prior to August 1, 1996 were taxable under Entry 114 or as general goods. It held that the manufacturing process involving wood chips brought them within Entry 114, dismissing the revision.
The revisions were dismissed; pending miscellaneous petitions were disposed of.
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THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY
T.R.C. Nos.212 and 213 of 2001
COMMON ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan)
Both these revisions are preferred against the orders passed by the Sales Tax Appellate Tribunal in T.A.Nos.109 and 108 of 1996 respectively. While T.A.No.109 of 1996, against which TRC.No.212 of 2001 is filed, relates to the assessment year 1991-92 (APGST), T.A.No.108 of 1996, against which TRC.No.213 of 2001 is filed, relates to the assessment year 1990-91 (APGST).
The petitioner herein is an assessee on the rolls of the Commercial Tax Officer, Hyderabad, and is dealing with Medium Density Fibre (MDF) Boards. They were finally assessed for the assessment years 1990-91, 1991-92 and 1992-93 under the Andhra Pradesh General Sales Tax Act, 1957 (the Act) by the assessing authority. The order of the assessing authority was revised by the Deputy Commissioner (CT), Hyderabad. Aggrieved thereby, the petitioner herein carried the matter in appeal to the Tribunal.
The contention urged before the Tribunal was that the revisional authority had erred in treating “MDF Boards” as covered by Entry 114 of the First Schedule to the Act; the MDF Boards, sold by the assessee, were reconstituted wood board panels i.e. an improved variety of particle boards (made from saw-dust); the MDF Boards were made of reconstituted wood from wood chips/small dio-meter wood which were converted into fibre and bonded with various types of resins to make superior quality boards; the MDF Boards could be put to any use to which plywood and particle boards, of various sizes and thickness, could be used; and they were gaining wider use by furniture industry in homes, offices etc. It was also contended that the goods covered by Entry 114 were only
plywood, particle board, lamin board, batten board, insulating board and veneered panels; the fibre boards manufactured and marketed by the petitioner were not covered by Entry 114; the MDF Boards could not be treated as plywood or particle board or as any of the items enumerated in Entry 114; the assessing authority was justified in treating MDF Boards as unclassified goods; and the revisional authority had failed to appreciate the distinction made in the I.S.I. specifications, and had erroneously concluded that all boards, manufactured with wood agglomerate and bonded with synthetic resin, should be classified under Entry 114 of the First Schedule to the APGST Act.
In the order under revision, the Tribunal noted, from the I.S.I specifications, that MDF Boards were those stipulated in I.S.I. 12406 – 1988; it was clear that the MDF Boards were manufactured from wood chips; clause 5.1 of the I.S.I specifications stipulated that wood, in natural form, was cut into small chips/particles on a suitable chipping machine; these wood chips were steamed and defibrated in a defibrating machine; the wood fibre produced was then dried in flash dryers and blended with resin and wax; the blended fibres were formed into mats by air felting, and were pressed into panels by passing them through a pressing machine under controlled heat, pressure and time conditions. The Tribunal referred to clause 6.1 of the I.S.I. Specifications to the effect that the MDF Boards shall be of uniform thickness and density throughout its length and width; all the MDF boards shall be flat; and both surfaces of the boards shall be sanded to a smooth finish. The Tribunal also referred to the findings of the Deputy Commissioner that the MDF Boards were none other than an improvised combination of those used by the particle board industry and the one used by the Hard Board Industry; by adopting such a method, the dealer had not brought an altogether different product to be used
for different purposes; the end-use of the article, though irrelevant, had gained importance in the present case because of the nature of the manufacturing process of the board; and taking into consideration its manufacturing methodology, together with its enduse, it was clear that the product was a particle board and hard board for better use by the persons required to use them. The Tribunal rejected the contention, urged on behalf of the petitioner, that the words “resins or with similar binders, and artificial” were missing in Entry 114 after its amendment by Act 4 of 1989; MDF Boards constituted a separate category after its amendment; and they could not be treated as included in Entry 114. The Tribunal held that the description of the boards, used in Entry 114, could not be taken as exhaustive, particularly, when it was stated in Entry 114 as “Whether or not containing any material other than wood, cellular wood, wood panels in respect of plywood, particle board, lamin board, batten board, hard or soft boards or insulating board”; the manufacturing process involved wood in its natural form, cut into small chips/particles in a suitable chipping machine and wood chips being steamed and defibrated in a suitable defibrating machine; the MDF Boards were manufactured with wood chips; as Entry 114 used the word “building board”, it was evident that the latter part of Entry 114 contained a general description of the product and the manner in which the product was manufactured; as the MDF Boards were manufactured with wood chips, they were covered by Entry 114 though not specifically mentioned in the Entry by its trade name or the name of the product; reliance placed on Novopan India Limited v. State of Andhra Pradesh (13 APSTJ 132) was misplaced as Entry 114 was amended by Act 4 of 1989 thereafter; the mere fact that the MDF Boards were not found in Entry 114 would not require the said product to be treated as an unclassified article because the second part of the Entry 114
referred to boards used generally in building or cellular boards; boards manufactured with wood chips were also covered therein; even though the name of the MDF Boards was not mentioned in Entry 114, the manner of manufacture would bring it within its ambit; and the Deputy Commissioner had rightly revised the order of the assessing authority imposing tax, on the articles mentioned, under Entry 114 of the First Schedule to the Act.
Sri S.Suri Babu, Learned Counsel for the petitioner, would submit that Entry 114 enumerates lamin board, batten board, hard or soft wall boards or other boards made out of wood pulp or vegetable fibre; the MDF Boards are not made out of wood, and contain only wood fibre; these goods are liable to be taxed only under the VII Schedule to the Act; the very fact that the words “lamin sheets, MDF Boards” were inserted into Entry 17 of the VI Schedule, by Act 27 of 1996 with effect from 01.08.1996, showed that MDF Boards did not fall within Entry 114 of the First Schedule to the Act; and prior to its inclusion in Entry 17 of the VI Schedule, by Act 27 of 1996 with effect from 01.08.1996, MDF Boards fell within the general category of goods in the VII Schedule to the Act.
Entry 114 of the First Schedule to the APGST Act, as applicable for the assessment years 1990-91 and 1991-92, read thus:
“Lamin board batten board, hard or soft wall boards or insulating board and veneered panels, whether or not containing any materials other than wood; cellular wood panels, building boards of wood pulp or of vegetable fibre whether or not bounded with natural or artificial or reconstituted wood being wood shavings, wood chips, saw dust, wood-flour or other ligneous waste agglomerated with natural or artificial resins or other organic binding substances in sheets, blocks, boards or in any other form.”
It is only, thereafter, were MDF Boards specifically brought within the ambit of Entry 17 of the VI Schedule to the APGST Act by Act 27 of 1996 with effect from 01.08.1996. The contention urged
on behalf of the petitioner is that, as the words “MDF boards” were inserted into Entry 17 of the VI Schedule with effect from 01.08.1996, and Entry 114 of the First Schedule remained unamended, it was evident that, prior to 01.08.1996, MDF Boards were taxable only as general goods under the VII Schedule, and not under Entry 114 of the First Schedule to the Act. As has been noted by the Tribunal, the process involved in manufacture of MDF Boards is to cut wood, in its natural form, into small chips/particles on a suitable chipping machine; these wood chips are steamed and defibrated in a suitable defibrating machine; the wood fibre, so produced, is dried in flash dryers, and is blended with resin and wax; the blended fibres are formed into mats by air felting; and are pressed into panels by passing them through a pressing machine under controlled heat, pressure and time conditions. Entry 114 includes particle boards and building boards of wood pulp or of vegetable fibre whether or not bonded with natural or artificial or reconstituted wood being wood shavings, wood chips, saw-dust, wood flour etc. which are bound into sheets, blocks and boards. Both the Deputy Commissioner and the Tribunal, on a detailed analysis of the relevant clauses of ISI specifications, have held that the MDF Boards fall within the ambit of Entry 114 of the First Schedule. The mere fact that Entry 17 of the VI Schedule was later amended, to bring within its ambit MDF Boards also, does not mean that it did not earlier fall within the ambit of Entry 114 of the first Schedule to the Act. What was implicit in Entry 114 of the First Schedule to the Act has, by Act 27 of 1996, been made explicit and brought under the ambit of Entry 17 of the VI Schedule. After the amendment of Entry 17 of the VI Schedule by Act 27 of 1996, MDF Boards are liable to be taxed thereunder, and not under Entry 114 of the First Schedule. However prior to Act 27 of 1996, as the MDF Boards manufactured by the petitioner were made out of wood
chips, they fell within the ambit of Entry 114, and were liable to be taxed at the rate stipulated therein. The Tribunal has rightly held that the subject MDF Boards could not be held to be “general goods” under the VII Schedule. We see no error in the order of the Tribunal necessitating exercise of the revisional jurisdiction under Section 22(1) of the Act.
The Revisions fail and are, accordingly, dismissed. Miscellaneous petitions pending, if any, shall also stand disposed of. There shall be no order as to costs.
RAMESH RANGANATHAN, J
M.SATYANARAYANA MURTHY,J
Date:21.08.2014 usd
1 issue framed by the court
Whether Medium Density Fibre (MDF) Boards manufactured before 01.08.1996 fell within Entry 114 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957.
Colour shows how this judgement treated each authority
Novopan India Limited v. State of Andhra PradeshDistinguished¶9
Novopan India Limited v. State of Andhra Pradesh (13 APSTJ 132)
3 provisions across 3 enactments
THE ASSASSE
STATE
RAMESH RANGANATHAN
M.SATYANARAYANA MURTHY
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
