6. What is the rate of tax applicable to the product ‘footwear’?

Transaction Date:
6-7-2005 Held: C-74-4%

E-1-12.5%

Facts in issue

There are two applicants who are registered dealers of footwear products. The products manufactured are chappals and shoes. The chappals are made of man-made fabric with plastic coated on it. The sole is made of polyurethane and other PVC compounds are injected into the mould to produce sole with strap. The shoes are also made of man-made fabric with plastic coated on it and sole is made of polyurethane.

The applicants contended that their products were covered by Schedule entry C-74 of the MVAT Act, 2002 and taxable at 4%.

The Commissioner observed that Schedule entry C-74 covered all types of ‘plastic footwear’ up to the month of April 2005. From May 2005, the entry covered only ‘moulded’ plastic footwear.

Therefore it had to be seen whether the product was covered under the description of moulded footwear.

The products were not entirely plastic products. Further the manufacturing of products covered activities like stitching, pasting etc. Thus, the products could not be said to be produced in a single mould. The products were not covered by entry
C-74 since they were not moulded plastic footwear.

Only for the month of April 2005, the product being plastic footwear was covered by Schedule entry C-74. From May 2005 onwards the product got covered by Schedule entry E-1 with rate of tax 12.5%.

The Commissioner held as follows:

Sr.No	Name of the product	Schedule	Rate of Tax Entry	Period
1	Walkie (Chappal)	E-1	12.50%	1.4.2005
				onwards
2	Paralite (EVA Chappal) (Plastic Footwear)	C-74	4%	1.4.2005 to 30.4.2005
	(Black, N. Blue, Gray, E-Blue)	E-1	12.50%	1.5.2005 onwards
3	Aviva (Footwear)	E-1	12.50%	1.4.2005
	Max (Footwear)			onwards
	Slickers (Footwear)
4	Easee (Footwear)	E-1	12.50%	1.4.2005
	Camry (Footwear)			onwards
	Slickers (Footwear)

[M/s. Preston India Pvt Ltd, M/s. Elastrex Polymers Pvt Ltd. DDQ No. DDQ-11-2005/Adm-5/93-94/B-2 dated 26-4-2007]

7. Whether the applicant is a manufacturer of split form of pulses in terms of section 2(15) of the Maharashtra Value Added Tax Act, 2002 and therefore entitled for grant of certificate of entitlement in accordance with the order issued under section 8 read with section 89 of the Maharashtra Value Added Tax Act, 2002?

Transaction Date: 25-10-2005 Held: It is a manufacturing

Activity u/s. 2 (15) of MVAT Act, 2002.

The applicant is a firm having a unit which converts wholegrain of pulses into dal. The unit being set up in a backward area had applied for grant of certificate of entitlement to the District Industry Centre under (DIC) Package Scheme of Incentives, 1993 and was granted the same.

A recommendation to Deputy Commissioner of Sales Tax for issue of certificate of entitlement was returned with the reason that in terms of section 2(17) of the BST Act, 1959, the activity of obtaining dal, i.e. by conversion of pulses in wholegrain to split form do not amount to manufacturing.

Under the provisions of the MVAT Act, 2002 there is no exclusion from the term ‘manufacture’ as was there under Rule 3 of the BST rules. In view of the above change in position of law, it was felt by the applicant that he was entitled for incentives; i.e., to avail of incentives either as exemption or deferment of tax.

The manufacturing process for conversion of pulses into dal is carried out with various machineries operating on power. About 70% to 74% of finished goods (dal) are realized from the whole processing and about 24% to 28% is realized in the form of chuni and bhusa which is used entirely as cattle feed. In the whole process, the shape of the original raw material is totally changed.

The applicant was of the opinion that the activity of converting wholegrain into dal (split form of pulses) amounted to manufacture. Also wholegrain of pulses were declared covered by Schedule entry A-9 (1) and were exempted from tax. The above activity was covered by the term ‘manufacture’ u/s. 2(17) of BST Act. However, because of the exclusion provided in Rule 3(xviii) of BST Rules, the activity was not considered as manufacture in the State of Maharashtra.

The applicant submitted that in his case the resultant product; i.e., dal was different than the whole form of pulses. The Supreme Court has laid down that when a new commercial product comes into existence as a result of a process, such an activity is defined as manufacture. The applicant relied on the following case laws:

The applicant argued that the process of converting wholegrain pulses into dal amounted to manufacture as defined in section 2(15) of MVAT, 2002 and therefore was entitled for grant of certificate of entitlement under order issued u/s. 8 of MVAT Act, 2002 read with section 89 of MVAT Act. In absence of any rule in MVAT Rules as was there under BST Rules, the activity would amount to manufacturing.

1. M/s. Kishore Food Product Pvt. Ltd. (App. No. 131 of 1997 decided on 8th March, 2002)
    

2. M/s. Rentio Foods Pvt. Ltd. vs. The State of Maharashtra (Appeal No. 69 of 2002 and Misc. Appl. No. 85 of 2002 decided on 13th December, 2002)

The Commissioner observed that the raw material; i.e., "Toor" was subjected to various processes of cleaning, sorting, sun drying, dehusking, oil application, splitting etc. By passing through various stages the shape of original material was changed. Thus it could be said to have undergone ‘processing and treating’ to form a new commercial commodity. Thus the activity of converting wholegrain pulses into dal was covered by the definition of manufacture u/s. 2(15) of MVAT Act, 2002. However, the applicant was not eligible for grant of entitlement certificate as the scheme of incentive 1993 had expired.

The Commissioner held that the applicant was manufacturer of split form of pulses but he was not entitled to grant of certificate of entitlement in accordance with the order issued u/s. 8 read with section 89 of the MVAT Act, 2002.

[M/s Madhwa Industries. DDQ No. DDQ-11-2005/Adm-5/90/B-3 dated
26-4-2007]

8. What is the classification and rate of tax of the product ‘Cross Link Foam’?

Transaction Date: 29-06-2006 Held: Covered by entry C-54,

Rate of tax is 4%.

Facts in issue

The applicant is a dealer in a variety of ‘Cross Link Foam’ and in respect of one such variety ‘Armcare XL Sheet Black’ has applied for determination.

The applicant contended that the impugned goods were used exclusively for packing of goods and therefore were covered by Sr. No. 164 of excise sub- heading 39.23 under Schedule entry C- 54 for industrial inputs and packing materials. The goods were used for packing of handicrafts or refrigerated materials and even air-conditioning machines to prevent the damage to goods packed.

Thus the goods were taxable at 4% being industrial input covered by Entry C-54 of MVAT Act, 2002.

The Commissioner examined the entry C-54 together with excise tariff heading 39.23 under the CET Act, 1985 and after considering the rule of interpretation to the notification to the Schedule entry C-54, observed that barring the insulated ware and carry bags, all the articles of conveyance and packing got covered under Sr. No. 164 till 31.8.2005 and 203 from 1.9.2005 onwards. Since the goods were used for packing only and were shown to have been cleared under excise tariff item No. 3923.90, these were not excluded by the notification as per the rules of interpretation.

The Commissioner held that the product ‘Cross Link Foam’would be a ‘packing material’ for the purpose of Sr. No. 164 and 203 in the notification issued for the purpose of Schedule entry C-54 and would be taxable at 4%.

[M/s. Reliable Dyes and Chemicals International DDQ No. DDQ-11/2006/Adm-5/58/B-5 dated 30-4-2007]