AZAM LAMINATORS P LTD Vs. SECRETARY TO GOVERNMENT

JUDGEMENT

(1.) THE question to be decided in these cases is whether scented betel/arecanut sold by the appellants is taxable at 4% under Entry No. 2 of the Third Schedule to the Kerala Value Added tax Act, 2003 (in short 'kvat Act') or under entry 75 (2) of S. R. O. No. 82 of 2006 attracting tax at 12. 5%. The Betel Nut Manufacturers' Association preferred an application under Section 94 of the KVAT Act before the Commissioner of commercial Taxes seeking clarification on the rate of tax applicable to the above product. By impugned order No. C3/25772/07/ct dated 14-1-2008, the commissioner clarified that the commodity is classified under entry 75 (2) of S. R. O no. 82 of 2006 and will attract tax at the rate of 12. 5%. That is questioned by the appellants herein. The matter was argued on behalf of the appellant by Smt. Nalin chidambaram, Senior Advocate and Shri Raju Joseph, Advocate. Special Standing counsel for Taxes, Shri Mohammed Rafiq presented the arguments for the revenue. The process of manufacturing of the commodity in question, namely scented arecanut, is not in dispute. The appellants cut the betel nut into small piece; and thereafter essential/non-essential oils like menthol and sweetening agents an added to make the commodity in question. Addition of essential oils like menthol sweetening agents etc. is for preservation and for improvement of appearance. They sell it as betel nut or scented betel nut and not as supari as the cover indicates ext. P-2 [w. P. (C) No. 25214 of 2007] certificate of analysis shows that 'nizan betel nut' marketed by the petitioner in W. P. (C) No. 25214 of 2007 contains mon than 85% betel nut apart from 5. 12% Edible Oil and 8. 24% Sugar/glucose am very minimal quantities of Saccharin, Menthol, Flavour and Cardamom. Port Health officer also certified in Ext. P-2 as follows:

(2.) BEFORE meeting the arguments, we will consider the relevant entries in the Act. SI. No. 2 of the Third Schedule to the KVAT Act reads as follows: <FRM>SAURAS0_62_ILR(KER)3_2008.HTM</FRM> Section 6 of the KVAT Act provides that goods specified in the First Schedule are not taxable and goods specified in the Second and Third Schedules are taxable at the rates specified therein and at all points of sale. Clause (d) of Section 6 (1)says that in case of goods not falling under Schedules I to III, the rate of tax is 12. 5% at all points of sale and that the State Government may notify a list of goods taxable at the rate of 12. 5%. So, the goods notified at 12. 5% and included in the schedule to the notification are goods not classifiable under Schedules I to III. So, the main point to be considered is whether the commodity in question can be classified under Entry No. 2 of the Third Schedule. In that case, the rate of tax is only 4%. To consider that question one has to look into the statutory Rules of Interpretation. Rules of Interpretation of Schedules to the KVAT Act read as follows:

(3.) WE have gone through the impugned order. The Commissioner has not considered the arguments based on the HSN Code as well as the Rules of interpretation. In a recent case, M/s Reckitt Benckiser (India) Ltd. v. Commissioner, Commercial Taxes [2008 (2) K. L. T. 604 S. C. ] arising from the kvat Act while considering the question of clarification of mosquito repellants, the supreme Court held as follows: