Transaction Date : 7-9-2005
Held : Rate of tax @ 0% – A-37
Facts in issue
Applicant is engaged in business of ‘Organic Fertilizer’ in
addition to Liquor, ‘Organic Fertilizer’ is manufactured by using the raw
material such as waste known as spent wash (Effluent).
The effluent contains organic matter which goes for
composting. It is the by product of sugar mills and distillery. The product is
sold as “Maharashtra Organic Fertilizer (Manure)”. In the bill, the applicant
has collected VAT tax @ NIL on the sale of product.
Submissions of the applicant
The applicant is of the opinion that, being ‘Manure’ the
product would be covered by the Schedule entry 37 of Schedule ‘A’ of the MVAT
Act, 2002 and not by Schedule entry 34 of Schedule ‘C’ of the said Act.
It is also known as natural manure in commercial parlance,
and perceived as such by the sellers and users.
The applicant is basically a manufacturer of liquor. The
manufacturing process generates 8% alcohol-rectified spirit, and 92% waste –
spent wash. The spent wash so obtained is not used as it is. Methane gas is
prepared from the same, is used in boiler as a fuel. The raw material used in
the manufacture; i.e., filling materials, are pressmud, solid waste and
sludge.
In short, it was contended that, the product put up for
determination is organic manure covered by the Schedule entry A – 37.
Views of the department
The Commissioner scrutinized the facts of the case and
product involved herein is “Maharashtra Organic Fertilizer (Manure)”. It can
be seen from the above that if the product is organic manure, it would attract
@ 0% whereas if it is a fertilizer, then the tax thereon would be 4%. He
considered A-37 and Old and New C–34 schedule entries put forth by the
applicant.
The apparent similarity in the function of the products,
the fact that they belong to a common category, and also that under the VAT
Act, ‘manures’ are tax free while ‘biofertilisers’ and ‘fertilisers’ are
taxable @ 4%. The issue pertains to exact classification of the product; i.e.,
whether ‘fertilizer’ or a ‘manure’
The definition of manure has not been given in the Act, the
Webster’s Dictionary explains manure as “any natural or artificial substance
for fertilizing the soil especially dung and refuse”; i.e., it emphasises on
the natural process which involves a product useful for fertilizing of the
soils.
He proceed to understand the meanings of the terms on the
basis of which tax rate would be determined, he have referred to many
educational sites on the internet for the characteristics of manure or
fertilizer and Bio fertilizer.
He has verified the characteristic of each of the
categories as ‘Manure’, ‘Inorganic Fertiliser’, and ‘Biofertiliser’.
He has also verified that whether the product is ‘Oil Cake’
or ‘De-Oiled Cake’, whether ‘Plant growth promoters or regulators’, whether
‘Micronutrients’.
Held
The Commissioner held that the product put up for
determination is an ‘Organic Manure’ made from Organic raw materials gets
covered by schedule entry A-37 attracting tax at the rate of 0%.’
[M/s. Tilaknagar Industries Ltd. DDQ/11/2005/Adm-2/81/B-4
dated 30-11-2007.]
