Linde India Limited V. The Assistant Commissioner, Anti Evasion-Rajasthan, Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur

STR/89/2020

AI Insights

The case involves multiple Sales Tax Revisions filed by M/s Linde India Limited against the Assistant Commissioner, Anti-Evasion, Rajasthan, concerning the classification of certain industrial gases for tax purposes under the Rajasthan Value Added Tax Act, 2003 (RVAT Act). The petitioner argued that their products, which include mixtures of gases like Argon, Carbon Dioxide, and Oxygen, should be classified under Entry No. 35 of Schedule IV as 'Industrial Inputs', attracting a tax rate of 5.5%. However, the respondent reclassified these products as a mixture of gases under a residual entry, leading to a higher tax rate of 14.5%. The court examined whether the reclassification was justified and whether the gases, even when mixed, could still be considered under the specific entry for industrial inputs.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 806061 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 11-09-2023
• Assessment Year: misc
• Other Referred Cases: Voltas Ltd. vs. State of Gujarat, Union of India (UOI) and Ors. vs. Garware Nylons Ltd. and Ors., Commissioner of Central Excise, Vadodara vs. Vadilal Gases Ltd. and Ors., State of Maharashtra vs. Bradma of India Ltd., Hindustan Poles Corporation vs. Commissioner of Central Excise, Calcutta, Krishi Utpadan Mandi Samiti and Ors. vs. Ved Ram, Commissioner of Income Tax-1, Mumbai vs. Hindustan Petroleum Corporation Ltd., Vadilal Chemicals Ltd. vs. The State of Andhra Pradesh and Ors., Orient Paper Mills Ltd. vs. Union of India, Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur
• Laws Referred To: Rajasthan Value Added Tax Act, 2003, Central Sales Tax Act, 1956, Rajasthan Goods & Services Tax Act, 2017
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PUNIT SINGHVI; AYUSH SINGH
• Assessee Lawyers: VIKRAM GOGRA
• Keywords: Entry No. 35; Industrial Inputs; Residual entry; Sales Tax Revision; Schedule IV; Tax liability; Classification of Gases
• Section: 9; 23; 24; 84; 174; 91(4)

Judgement Text

"[2023:RJ-JP:19647] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Sales Tax Revision / Reference No. 95/2022 M/s Linde India Limited, B-821, Industrial Area, Bhiwadi, Alwar. ----Petitioner Versus The Assistant Commissioner, Anti Evasion-Rajasthan, Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent Connected With S.B. Sales Tax Revision / Reference No. 51/2020 M/s. Linde India Limited, B-821, Industrial Area, Bhiwadi, Alwar. ----Petitioner Versus The Assistant Commissioner, Anti-Evasion- Rajasthan, Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent S.B. Sales Tax Revision / Reference No. 52/2020 M/s. Linde India Limited, B-821, Industrial Area, Bhiwadi, Alwar. ----Petitioner Versus The Assistant Commissioner, Anti-Evasion- Rajasthan, Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent S.B. Sales Tax Revision / Reference No. 53/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar, ----Petitioner Versus The Assistant Commissioner, Ati-Evasion, Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent S.B. Sales Tax Revision / Reference No. 71/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus [2023:RJ-JP:19647] (2 of 15) [STR-95/2022] The Assistant Commissioner, Ati-Evasion, Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent S.B. Sales Tax Revision / Reference No. 88/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 89/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 90/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 91/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 94/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner [2023:RJ-JP:19647] (3 of 15) [STR-95/2022] Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 95/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 99/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 100/2020 M/s Linde India Ltd., B-821, Industrial Area, Bhiwadi, Alwar ----Petitioner Versus The Assistant Commissioner, Anti-Evasion Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur ----Respondent S.B. Sales Tax Revision / Reference No. 86/2022 M/s Linde India Limited, B-821, Industrial Area, Bhiwadi, Alwar. ----Petitioner Versus The Assistant Commissioner, Anti-Evasion-Rajasthan Circle-I, Kar Bhawan, Ambedkar Circle, Jaipur. ----Respondent For Petitioner(s) : Mr. Vikram Kumar Gogra [2023:RJ-JP:19647] (4 of 15) [STR-95/2022] For Respondent(s) : Mr. Punit Singhvi with Mr. Ayush Singh HON'BLE MR. JUSTICE SAMEER JAIN Judgment Reserved on: 11/07/2023 Pronounced on: 11/09/2023 1. The present Sales Tax Revisions / References (for short “STRs”), filed under Section 84 of the Rajasthan Value Added Tax Act, 2003 (for short “RVAT Act”), were admitted on following question of law: “Whether specific entry no.35 of Schedule-IV do not cover the ‘Argon Carbon Dioxide, Oxygen, Hydrogen, Carbon gases as “Other non metals?” 2. Since common question of law is involved in all these STRs, with the consent of the parties, they were heard together and are now being decided by way of this common order. STR No. 94/2020 is taken as lead file to peruse the facts. 3. Learned counsel for the petitioner-assessee submits that the petitioner-assessee, a limited company, was duly registered as a dealer under the RVAT Act and The Central Sales Tax Act, 1956 (for short “CST Act”) and was regularly filing quarterly as well as annual returns with the concerned assessing authority. The assessing authority was regularly assessing the liability of the petitioner-assessee by framing assessment orders under Section 9 of the CST Act read with Sections 23 and 24 of the RVAT Act, for each financial year, since the registration of the petitioner-assessee with the Commercial Taxes Department. The petitioner-assessee was engaged in the business of manufacture and sale of various types of industrial and rare gases and the [2023:RJ-JP:19647] (5 of 15) [STR-95/2022] petitioner-assessee effected the sales by treating their products as ‘Industrial Inputs’, covered under Entry 35 of Part B of Schedule IV to the RVAT Act, which reads as: “Entry No. 25: Hydrogen, rare gases and other non metals : 5 / 5.5%”. As per the learned counsel for the petitioner-assessee, the cause and controversy in the matter arose when a survey of the petitioner-company’s business premises was conducted by the respondent-revenue on 21.12.2016 and the long standing and long accepted classification of the goods in question was disturbed by the respondent-revenue by treating the filling process of two or more gases in a single cylinder as mixture of gases and accordingly treating the sale of these goods prior to 14.07.2014 as covered under Entry No. 78 (residual entry) of Schedule V to the RVAT Act attracting tax at 14.5% and with effect from 14.07.2014 under Entry No. 29 (“Entry No. 29: Gases liquefied or not, other than those specifically mentioned in any of the Schedules : 14.5%”) of Schedule V to the RVAT Act which also attracted tax at the rate of 14.5%. Consequently, the respondent-revenue, vide assessment order dated 31.10.2017, disqualified the sale of these gases from the entry of ‘Industrial Inputs’ and accordingly levied differential additional tax, interest and penalty thereupon from AY 2011-2012 to AY 2016-2017. The appeals against the said levy was rejected, both by the Appellate Authority vide order dated 26.03.2018 and by the Rajasthan Tax Board vide order dated 26.03.2018, erroneously, by relying upon a Clarification dated 03.08.2017 issued by the Commissioner, Commercial Taxes under Section 91(4) of the RVAT Act read with Section 174 of the Rajasthan Goods & Services Tax Act, 2017 (for short “RGST Act”) and both [2023:RJ-JP:19647] (6 of 15) [STR-95/2022] these authorities maintained the levy of additional tax and interest but deleted the penalty thereupon. 4. Learned counsel for the petitioner-assessee has assailed the impugned levy of additional tax and interest, primarily on the following grounds: 4.1. That the gases produced and sold by the petitioner- assessee are inarguably the gases mentioned in Entry No. 34 of Part B of Schedule-IV to the RVAT Act. The only reason assigned by the respondent-revenue, to deviate from the specific entry, that too after a period of over 11 years, is that the petitioner-assessee was selling different gases in a single container. The said reason was opined by the Commissioner in his Clarification dated 03.08.2017, which in itself was in excess of the query raised by the Rajasthan Industrial Gases Manufactures Association. However, the said opinion of the Commissioner is bereft of any reasoning. Further, the clarification was also given on 03.08.2017, i.e. after the repeal of RVAT Act and introduction of GST regime. Such clarification could not be given retrospective application, especially when the regular assessing authority had always accepted the goods in question to be ‘Industrial Inputs’. Moreover, as per settled position of law, the onus or burden to prove that a product falls within a particular tariff is always on the revenue, more so when the revenue is trying to place the goods in the orphan/residual entry as against the specific entry. However, the respondent-revenue has not discharged its onus to prove that the product in question would not fall under Entry No. 35 of Part B of Schedule IV to the RVAT Act. It is submitted that neither any expert / technical opinion was sought nor any evidence was [2023:RJ-JP:19647] (7 of 15) [STR-95/2022] brought on record to establish that the mixture of inert gases filled in cylinders by the petitioner-assessee is a product which is different and identifiable as such and known by a different name in the market and that the product(s) in question does not fall within the ambit of Entry No. 35 of Part B of Schedule IV to the RVAT Act and since the respondent-revenue has failed to discharge its onus, the reference ought to be allowed in favour of the petitioner-assessee. Reliance in this regard is placed on Apex Court judgments of Voltas Ltd. vs. State of Gujarat: (2015) 7 SCC 527 and Union of India (UOI) and Ors. vs. Garware Nylons Ltd. and Ors.: (1996) 10 SCC 413. 4.2. That the opinion of the learned Commissioner and consequently the findings of all the authorities below are based on unsound understanding of the scientific principles involved. The nature of the rare gases involved in this case, also known as noble gases, is such that these gases are inert and hence they do not react with other gases inside the same container. Even if two or more of these gases are filled in the same container, each gas retains its individual characteristic and remain separately identifiable while in use. The filling of two or more of these gases has not resulted in the emergence of a new and different product with distinct use and marketability. The filling of two or more gases in one container was done simply for the convenience of the customers and to make it more economical. To support this contention, learned counsel for the petitioner-assessee has placed on record the Analysis Report of the products in question. Reliance is also placed on Apex Court judgment of Commissioner of Central Excise, Vadodara vs. Vadilal Gases Ltd. and Ors.: [2023:RJ-JP:19647] (8 of 15) [STR-95/2022] (2018) 13 SCC 473, wherein it was observed that mixing of two or more gases does not amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. 4.3. That indisputably, the gases in question are those which are specifically mentioned in Entry No. 35 of Part B of Schedule IV to the RVAT Act. It is an established cannon of classification that a specific entry would override a general entry. Reliance in this regard is placed on Apex Court judgments of State of Maharashtra vs. Bradma of India Ltd.: [(2005) 140 STC 17 (SC)], Hindustan Poles Corporation vs. Commissioner of Central Excise, Calcutta: [(2006) 145 STC 625 (SC)], and Krishi Utpadan Mandi Samiti and Ors. vs. Ved Ram: [2012 (277) ELT 299 (SC)]. It is stated that a special entry must prevail over the general entry and that the residuary clause can be invoked only if the department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the tariff items. Since the gases in question are those that are specifically covered by Entry No. 35 of Part B of Schedule IV to the RVAT Act, the respondent-revenue cannot be permitted to deviate from the specific entry. 4.4. That the Clarification issued by the Commissioner was not binding on the Appellate Authority or on the Tax Board as those bodies discharge judicial functions and it is well settled that circulars/clarification issued by any Department are not binding on judicial / quasi judicial bodies. 5. Per contra, supporting the concurrent findings of all the authorities below, learned counsel for the respondent-revenue submits that no question of law worth consideration arises in the [2023:RJ-JP:19647] (9 of 15) [STR-95/2022] present STRs. On merits, learned counsel for the respondent- revenue made the following submissions: 5.1. That Entry No. 35 of Part B of Schedule IV to the RVAT Act is limited to individual gases (as ‘Industrial Inputs’) and not mixture of gases. The product in question have rightly been held to be mixture of gases, especially because they are inert gases, as otherwise the gases would have reacted with each other and formed an entirely new gas/substance, as the case may be. If the contention of the petitioner-assessee is accepted, then nothing would result in ‘mixture’ of gases as gases other than inert gases would react and form entirely new compound with its distinct characteristics. It is only when the product in question contain an inert gas that mixture of gases is possible. 5.2. That the mixing of different gases in one container is not for the mere convenience of the customers, as alleged. It is submitted that specific types of gases are mixed in a particular combination and composition for a particular purpose and even though the gases do not react with each other while inside the container, they are released together and each combination/composition serves a specific purpose. For instance, Argoshield Gas, which is a mixture of argon (93%), carbon dioxide (5%), and oxygen (2%), is designed predominately for welding thinner material. The literature available on petitioner-assessee’s own website would reveal that the petitioner-assessee was mixing specific gases in specific composition for a specific end use. Learned counsel for the respondent-revenue contends that the revenue has used the literature supplied by the petitioner- assessee itself to discharge its burden and only after due [2023:RJ-JP:19647] (10 of 15) [STR-95/2022] consideration arrived at the conclusion that the goods in question were not ‘industrial inputs’. The said conclusion, which is essentially a finding of fact, has also been upheld by all the authorities below. 5.3. That even as per common parlance test and end usage test, the mixture of the gases in specific composition results in an end product which is distinct from the individual gases and serves a purpose which the individual gas cannot serve. Learned counsel for the respondent-revenue has also relied on Apex Court judgments of Commissioner of Income Tax-1, Mumbai vs. Hindustan Petroleum Corporation Ltd.: (2017) 15 SCC 254 and Vadilal Chemicals Ltd. vs. The State of Andhra Pradesh and Ors.: (2005) 6 SCC 292 to submit that repackaging would also amount to manufacture. 6. Heard the arguments advanced by both the sides, scanned the record and considered the judgments cited at Bar. 7. Before adverting to the merits of the case, it is necessary to consider the Entry No. 35 of Part B of Schedule IV to the RVAT Act. Part B of Schedule IV deals with goods under the category of ‘Industrial Inputs’ and Entry No. 35 includes “Hydrogen, rare gases and other non-metals”. 8. Rare gases, as per the periodic table, includes: (i) Helium (He), (ii) Neon (Ne), (iii) Argon (Ar), (iv) Krypton (Kr), (v) Xenon (Xe), (vi) Radon (Rn), and [2023:RJ-JP:19647] (11 of 15) [STR-95/2022] (vii) Oganesson (Og). 9. Other non-metals, as per the periodic table, includes: (i) Hydrogen (H), (ii) Helium (He), (iii) Carbon (C), (iv) Nitrogen (N), (v) Oxygen (O), (vi) Fluorine (F), (vii) Neon (Ne), (viii) Phosphorous (P), (ix) Sulphur (S), (x) Chlorine (Cl), (xi) Argon (Ar), (xii) Selenium (Se), (xiii) Bromine (Br), (xiv) Krypton (Kr), (xv) Iodine (I), (xvi) Xenon (Xe), and (xvii) Radon (Rn). 10. The products in question, the purported mixture of gases, are as follows: (i) Argoshield: comprising of Argon, Carbon dioxide, and Oxygen. (ii) Corgon: comprising of Argon and Carbon dioxide. (iii) XL Mix Gases: comprising of Hydrogen, Oxygen, Argon and Carbon. 11. The respondent-revenue wants to classify the products in question in the residual entry, i.e. Entry No. 78 of Schedule V to the RVAT Act till 13.07.2014 and w.e.f. 14.07.2014 under Entry [2023:RJ-JP:19647] (12 of 15) [STR-95/2022] No. 29 of Schedule V to the RVAT Act which reads as “Gases liquefied or not, other than those specifically mentioned in any of the Schedules”. However, it is quite apparent that gases involved in the products in question are individually covered under Entry No. 35 of Part B of Schedule IV to the RVAT Act. What remains to be determined is whether a combination/mixture of these gases, which are individually covered, can be ousted from the said Entry. 12. It is noted that the standard practice followed by petitioner-assessee, since inception, was classifying the products in question as ‘Industrial Inputs’ taxable as per Entry No. 35 of Part B of Schedule IV to the RVAT Act. The petitioner-assessee was regularly filing the returns as required under law and the jurisdictional assessing authority had accepted said classification for several years. It was only after the survey, which was conducted on 21.12.2016, that the opinion of the respondent- revenue changed - after about 11 years - on account of the Clarification dated 03.08.2017, issued by the Commissioner, and the long accepted classification was abandoned. On perusal of the impugned orders, it appears that the primary reason for disregarding the long accepted classification is attributed to the fact that though the gases do not react with each other, since they are released together, they form a new commodity which is not specifically covered under Entry No. 35 of Part B of Schedule IV to the RVAT Act. Accordingly, the impugned assessment order was passed wherein the products in question were classified under Entry No. 78 (residual entry) of Schedule V to the RVAT Act attracting tax at 14.5% till 13.07.2014 and with effect from 14.07.2014 under Entry No. 29 (“Entry No. 29: Gases liquefied or [2023:RJ-JP:19647] (13 of 15) [STR-95/2022] not, other than those specifically mentioned in any of the Schedules : 14.5%”) of Schedule V to the RVAT Act which also attracted tax at the rate of 14.5%. As per the settled position of law, as held in UOI vs. M/s Garware Nylons Ltd (supra), Voltas Ltd. vs. State of Gujarat (supra), and CCE vs. Hindustan Lever Ltd. (supra), the burden to prove that a specific product falls within a particular tariff is always on the revenue, more so when the revenue is trying to classify the products in the residual entry as against the specific entry. 13. In the case in hand, it is apparent that the long standing classification was disturbed merely on the basis of a Clarification issued by the Commissioner under Section 91(4) of the RVAT Act. The Clarification dated 03.08.2017 is reproduced as under: “ An issue regarding classification of the item “non- metals” was brought to the notice of this Department by Rajasthan Industrial Gases Manufacturers Association. The said Association has informed that the lower tax authorities are not interpreting the term “non-metals” properly and resultantly causing unnecessary hardship to manufacturers and traders of these goods. In this regard, the entry no. 35 of Part B of Schedule IV appended to the RVAT Act, 2003 has been perused and the issue at hand examined. Entry No. 35 of Part-B (industrial inputs) of Schedule IV provides the rate of tax for “Hydrogen, rare gases and other non metals” as 5.5%. Non-metals have been classified by the “periodic table of chemical elements” according to which seventeen elements are generally classified as non-metals. They are hydrogen, helium, nitrogen, oxygen, fluorine, neon, chlorine, argon, krypton, xenon, radon, bromine, carbon, phosphorous, sulphur, selenium and iodine. However, it has been brought to my notice that some of the elements like chlorine, sulphur, etc., even though being “non-metals”, have been separately mentioned in different entriesof the Schedules and this has been causing confusion especially as regards to the fate of the other non-metals. [2023:RJ-JP:19647] (14 of 15) [STR-95/2022] In this context, so as to maintain uniformity in the work of assessment and collection of revenue, it is hereby clarified that the seventeen elements specified above are non-metals, irrespective of their specific mention or not in any of the other entry/entries, and so, are accordingly taxable as per entry no. 35 of Part-B (Industrial Inputs) of Schedule-IV @5.5% upto 30.06.2017. It automatically follows that when mixed together or with other elements to form compounds or mixtures, they were not covered by the said entry.” It is noted that the said clarification, which was issued after the repeal of the VAT Act, is not supported by any technical/expert report/opinion. It cannot be emphasized enough that in indirect tax matters, long standing classification cannot be disturbed merely on personal opinion/knowledge. The revenue has to discharge its burden to prove that the change in classification is warranted and necessary by adducing cogent and corroborating evidence. Mere assertion or personal opinion, even of the Commissioner, without any supporting evidence is of no use or value. Since the revenue has not discharged its burden to show that the products in question, i.e. mixture of the gases which are individually covered under Entry No. 35 (‘Industrial Inputs’), would not be covered in the broad Entry No. 35 of Part B (‘Industrial Inputs’) of Schedule IV to the RVAT Act, the levy of additional tax and interest cannot be sustained. 14. Even otherwise, the order(s) impugned of the learned Tax Board and all the authorities below deserves to be quashed and set aside for the following additional reasons:- 14.1. Because the reliance placed by all the authorities below on the Clarification dated 03.08.2017 is onerous. The Appellate Authority and the Tax Board are discharging quasi-judicial/judicial functions and no Departmental circular or clarification is binding [2023:RJ-JP:19647] (15 of 15) [STR-95/2022] on such bodies when exercising quasi-judicial/judicial functions. Reliance in this regard can be placed on Apex Court judgment of Orient Paper Mills Ltd. vs. Union of India: AIR 1969 SC 48. 14.2. Because as per settled position of law, a clarificatory circular can be applied retrospectively only when the same is beneficial to the assessee and not otherwise. Reliance in this regard is placed on Apex Court judgment of Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur: (2006) 12 SCC 452. 14.3. Because none of the judgments relied upon by learned counsel for the respondent-revenue are on the issue involved and are therefore distinguishable and inapplicable. 15. In view of the above, the question of law framed hereinabove have to be answered in favour of the petitioner- assessee and against the respondent-revenue. 16. Accordingly, all these STRs are allowed. The order impugned of the Tax Board and the authorities below are quashed and set aside. 17. Pending application(s), if any, shall stand disposed of. (SAMEER JAIN),J Raghu/86-99 "