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Whether the sales of following goods are liable to tax at
4% under entry C-33(a) of the MVAT Act, 2002?
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Deluxe Hot Tiffin
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Hot Casserole
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Hot Pot
Transaction date: 14-7-2005
Held – Taxable at 12.5% under Schedule Entry E-1.
Facts in issue
The applicant deals in items made of stainless steel. He
has been treating the sales of items, Hot Casserole, Deluxe Hot Tiffin and Hot
Pot as taxable under Schedule Entry C-33 (a) of MVAT Act, 2002 which reads as
‘Ferrous and non-ferrous domestic utensils other than those made from precious
metals’ with rate of tax at 4%.
The applicant obtained certificates from Steel Industries
Association and VJTI that the products were domestic utensils alongwith the
description of manufacturing process.
Submissions of the applicant
The applicant was of the view that the products fall under
Schedule entry C-33(a) of MVAT, 2002 which covered domestic utensils. The
products are used in households and are used to keep food hot after it has
been cooked.
The applicant further prayed that if goods were held as not
covered by Schedule entry C-33(a) of MVAT Act, 2002, then prospective effect
be given to the determination order.
Views of the Department
The Commissioner examined the definition of the word
‘utensils’ as per dictionary meaning.
He also observed that the issue had already been decided in
the applicant’s own case under the BST Act, 1959 where the sales of products
were held as covered by entry C-II-53. This entry pertained to vacuum flasks,
thermoses, urns, ice boxes or other domestic containers which are used to keep
food or beverages hot or cold and the components, parts and accessories of
such containers. The Schedule entry C-II-53 being a special entry prevailed
over the general entry C-II 26/C-II-26(1).
As per the inspection report of VJTI, the products could
not be used as a cooking device.
The Commissioner observed that the entry C-33(a) refers to
domestic utensils whether coated or not. Such coating is visible from outside.
The coating in case of the relevant items is between the outer and inner
casing and is not visible from outside. The coating is for keeping food hot
for hours. Thus the entry C-33(a) would not apply.
Case laws relied upon
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The Commissioner of Sales Tax vs. Neelam Appliances
decided on 21-10-2005.
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Collector of Central Excise vs. Sandip Metal Industries
(decided on 18-3-1987) [1989 (42) ELT 142 (Tribunal)].
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Collector of Central Excise, Ahmedabad vs. Kwality Metal
Corporation [final order decided on 1-12-1998] [1999 (150) ELT 323
(Tribunal).
The above judgments interpret the word ‘utensils’. The
intention of the legislature was to levy tax at a lesser rate of 4% on
utensils used daily in households to cook/serve food. The legislature did not
seek to cover special purpose items such as serveware which kept food hot for
long periods of time.
Under the MVAT Act, 2002, in the absence of a specific
entry for items of the nature as meant for Schedule entry C-II-53 of the BST
Act, 1959, the residuary entry E-1 of the MVAT Act, 2002 becomes applicable.
As for the prospective effect, the Schedule entry appears
very clear and self-speaking. The applicant ignored the treatment under the
taxing statute and thus prospective effect could not be granted.
Held
The Commissioner held the products as covered by Schedule
entry E-1 taxable at 12.5%. The Commissioner rejected the applicant’s request
for prospective effect.
[M/s. Vinod Stainless Steel Works, DDQ No.
DDQ-11-2005/Adm-5/65/B-3 dated 10th April 2006]
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(i) Whether the process of preparation of mouth freshener
by mixing of fried spices with salt, sugar, etc. amounts to manufacturing
process u/s. 2(15) of MVAT Act, 2002?
(ii) Whether the applicant’s purchases of spices and
selling the mixture of spices known as ‘mukhwas’ amounts to resale u/s. 2(22)
of MVAT Act, 2002 ?
(iii) What is the classification and rate of tax of the
product ‘mouth freshener’ ?
Transaction date: 25-6-2005
Held – 1. It is a manufacturing Process.
2. Not a resale.
3. E-1, 12.5%
Facts in issue
The applicant purchases raw materials like fennel, sesamum
or til seeds, ajwain, cumin seeds, clove, elachi, black pepper, sunth, dry
mango, dhana dal, amala, turmeric, salt, sugar, rock salt, sat nimbu, etc.,
These raw materials are roasted and then salt, sugar, etc. is added
proportionately. The product thus processed is sold as mouth freshener.
Submissions of the applicant
The applicant contends that the process of mixing various
seeds and spices with proportionate quantum of sugar, salt and scented flavour
and selling the same as mouth freshener does not amount to a manufacturing
process.
The applicant also contended that if it was treated as a
non-manufacturing process then the purchases of spices, seeds, sugar and salt
etc. from registered dealers should be treated as resale.
As for the rate of tax and schedule entries applicable, the
various entries under Schedule A & C for seeds, spices, sugar, etc. would
apply.
The applicant submitted that Entry C-91 pertaining to
spices should be considered as covering the product mouth freshener.
Alternately, the products could be classified under Schedule entry C-107 (ii)(f)
which relates to food stuff and food provisions.
The applicant prays that if the product is treated as
falling under Schedule entry E-I then his liability be protected.
Views of the Department
The Commissioner observed that the preparation of the
product ‘Mukhwas’ and ‘Mouth Freshener’ involved roasting and frying, adding
of other ingredients, mixing of preservatives, flavours and packing in small
pouches .
Case laws relied upon
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M/s. Arihant Agencies & SAC Packaging
(DDQ-11-2000/Adm-5/B-20 and B-4 Mumbai, dated 15-6-2001.
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M/s. Swastic Trading (DDQ-11-2003/Adm-5/12/B-6 Mumbai,
dated 27-6-2003)
The test laid down here was that any process would be
manufacture when it has an impact on the ingredients involved in it.
On examining the definition of manufacture and resale under
the BST Act and MVAT Act, the Commissioner observed that there was not much
difference. In the applicant’s own case under the BST Act, the process of
preparing the varieties of ‘Mukhwas’ was held as a manufacturing process. The
definition of manufacture in the MVAT Act and BST Act being pari passu the
process of preparation of mouth freshener by mixing fried spices with salt,
sugar etc. amounted to manufacture as per section 2(11) of MVAT Act, 2002.
Since the preparation of mouth freshener is considered
manufacture, there cannot be resale as contemplated under section 2(22) of the
MVAT Act.
The applicants claim that the rate of tax applicable to
spices, seeds, sugar etc. would be the rate applicable to mouth freshener is
not tenable.
The product is sold as ‘Mukhwas’ or “Mouth Freshener”.
Nobody uses the product as spices and therefore, the products cannot be
classified under the respective entry for the ingredients used.
The applicants contention that the product may be
considered as food stuff is also not acceptable since mouth freshener cannot
be regarded as food possessing the quality to maintain life and its growth.
Thus the product would get covered by residuary schedule entry E-1 of MVAT Act
2002.
As regards the prospective effect to be granted there being
no statutory misguidance due to there being a number of judicial
pronouncements the request for prospective effect was rejected.
Held
The Commissioner held that
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The process of preparation of mouth freshener amounted to
manufacture.
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The applicant’s purchase of spices and selling the
mixture as Mukhwas could not be regarded as resale.
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The product falls under schedule Entry E-1 attracting tax
at 12.5%.
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Prospective effect is rejected.
[M/s. Swastik Trading Company DDQ NO.
DDQ-11-2005/Adm-5/51/B-3 dated 22-5-2006]
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What is the classification and rate of tax for continuous
sprayers and automatic pressure sprayers ?
Transaction date: 30-10-2005
Held – A-1, nil rate of tax
Facts in issue
The applicant has developed two patents for manufacturing
agricultural sprayers. The sprayers are operated manually. The continuous
sprayers are used to spray insecticides/pesticides. The flexible nozzle system
allows covering remotest possible area. In the Automatic pressure sprayers,
air can be stored in the container and mist and jet spray can be done which
can go to the extent of 7 metres.
The applicant submits that the products are manufactured
according to international standards and are ideal for effective spraying of
insecticides/ pesticides to control pests and to check diseases in plantation
and horticultural plants.
As the products are designed to give continuous jet spray
up to a distance of approximately 7 metres, the same are not suitable for
domestic use. The products also cannot be used in hair dressing saloons and
beauty parlours. The products are suited for tea and coffee plantations, fruit
gardens and farms.
Submissions of the applicant
The applicant contended that the sprayers are agricultural
implements which can be operated manually and fall under Schedule entry A-1.
The applicant further submitted that the products are primarily used in farms
and fields for spraying insecticides / pesticides, that the primary use of the
product is not for household purposes. The impugned spray is an automatic and
continuous sprayer and can spray upto a distance of about seven metres and
this is useful only to control pests and insects for all types of plantation
of farms and fruit trees.
Views of the Department
The Commissioner observed that Schedule entry A-1 seeks to
cover.
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agricultural implements which are (a) manually operated
or animal driven, (b) notified by the State Government.
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Components and parts of such implements.
The notification for the purpose of this Schedule Entry
seeks to cover agricultural sprayers costing less than Rs. 10,000/- per piece.
Since the products are primarily used in agricultural
activities and satisfy the conditions meant for the purpose of Schedule entry
A-1 and the notification, these fall under entry A-1 attracting nil rate of
tax.
Held
The Commissioner held that the sprayers fall under Schedule
Entry A-1 with nil rate of tax.
[M/s. Swastik Agro DDQ No. DDQ-11-206/Adm-5 /1/B-3 dated
2-6-2006.]
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Whether the transactions of sale of spectacle frames and
lens are admissible as resale?
Transaction date: 30-10-2003
Held –Admissible as resale
Facts in issue
The applicant is a registered dealer under the Bombay Sales
Tax Act, 1959 and the Central Sales Tax Act, 1956. He is a reseller dealing in
spectacle frames, sunglasses, spectacles, contact lenses and optical goods. He
also holds a registered Trade Mark ‘Vision World’ in respect of these goods.
Submissions of the applicant
The applicant submitted that he had purchased goods from a
registered dealer who was also holding the Trade Mark for the same goods. The
applicant did not use his own Trade Mark but the goods were sold on the Trade
Mark of some other Trade Mark holder. Although the registered logo ‘Vision
World’ connected with frames and lenses, etc. is affixed on the sale, cash
memos, it is only incidental as all the cash memos are printed with the same
logo. The applicant contends that the sales are admissible as resale.
Views of the Department
The Commissioner examined the provisions of law as regards
resale whereby a sale of purchased goods would not be a resale, if the seller
held a Trade Mark or a patent is respect of the goods sold.
According to the Trade Circular No. 14 of 1988 dated
22-4-1988, it is clarified that
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if a dealer purchases any goods and then sells the same
under his trade mark, he will not be entitled to resale.
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if a dealer holds a trade mark but does not use that
trade mark for any transaction of sale of goods, he still will not be
entitled to claim resale.
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if a dealer purchases any goods bearing a trade mark of
another dealer and sells goods under his own trade mark, he will not be
entitled to claim resale.
Case laws relied upon
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Tamilnadu Co-operative Milk Producers’ Federation Limited
vs. State of Tamilnadu and Another (Madras High Court 141 STC 277)
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M/s. Dawood & Company (Appeal No. 104 of 1995 dated
21-8-1998)
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M/s. Indoken Ltd. vs. The State of Maharashtra (S.A. Nos.
5 and 6 of 1996 dt. 21-4-2001)
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M/s. Amrutlal Chemaux Limited vs. The State of
Maharashtra. (Second Appeal No. 172 of 1998 dt. 12-1-2001
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M/s. Amrutlal Chemaux Limited vs. The Stated of
Maharashtra (Appeal No. 15 of 1998 dtd.. 2-2-2002)
The ratio of all the above cases is fully applicable to the
applicant’s case.
Since the applicant has sold the goods without using his
own trade mark and they are sold under the trade mark held by others, the
applicant is entitled for ‘resale’ as per section 2(28) of the BST Act, 1959.
His sales cannot be treated as sales effected by using his own trade mark.
Held
The Commissioner held the transaction of sales of spectacle
frames and spectacle lens as resale.
[M/s. Vision World DDQ No. DDQ-11-2003/Adm-5/58/B-4 dated
2-6-2006]
