The Additional Commissioner (Legal) ... vs M/S Lohiya Agencies

2. ‘Gypsum’ (calcium sulphate dihydrate – CaSO 4.2H2O) is a natural mineral which is used in a variety of activities and products like pesticides, as a soil additive, as a water additive, as a food additive, for plant treatment, but, more importantly, in the present context, for construction purposes. Under the Rajasthan Value Added Tax Act, 2003 (hereinafter referred to as ‘RVAT’), Entry 56 of Schedule IV specified ‘Gypsum’ as a taxable entity, at 4%. This Entry was, however, amended and substituted vide Notification No. F.12(63)FD/Tax/2005-19, dated 19.4.2006, notified, inter alia, to expand the 1 meaning of Entry 56 of Schedule IV of the RVAT by changing it to ‘Gypsum in all its forms’. The short question which arises for consideration in the present appeal is whether ‘gypsum board’ would fall within this Entry 56, and be taxed at 4%, for the relevant assessment years, or whether it would fall in the then residuary Entry 1 of Schedule V, to be taxed at 12.5%.

3. The brief facts which have given rise to the present dispute are as follows. M/s. Indian Gypsum Ltd. (hereinafter referred to as ‘IGL’), a manufacturer of what is commonly known as drywall or ‘gypsum board’, moved an application under Section 36 of RVAT before the Additional Commissioner, Commercial Tax Department, Rajasthan, Jaipur for ascertaining whether gypsum board would fall within the category of the amended Entry 56 of Schedule IV of the RVAT, with 4% rate of tax applicable, or under the residuary Entry referred to aforesaid. The Additional Commissioner, vide order dated 27.9.2007, opined that ‘gypsum board’, being commercially a different product would not fall under Entry 56 of Schedule IV of the RVAT but would fall under the residuary Entry, making it subject to the 12.5% slab of taxation. The gravamen of reasoning of the Additional Commissioner, as found from the order, is that ‘gypsum board’ is a separate commercial product using a different name and thus the factum of 95% of the ‘gypsum board’ being constituted of gypsum is not relevant, as supported by the fact that a long manufacturing process is involved in preparing ‘gypsum board’, wherein in addition to the calcination process, 2 additives, paper, foam, water etc., are used, resulting in the formation of a product having uses, quite dissimilar to gypsum.

4. M/s. Lohiya Agencies/respondent No.1, is stated to be a merchant dealing in ‘gypsum board’ procured from IGL and, thus, came to be assessed by the Commercial Tax Officer for the assessment year 2006-07 and 2007-08 on 25.8.2007, post-inspection of his premises. Since the sale of gypsum board has been made with the VAT rate at 4% despite the said goods not falling under Entry 56 of Schedule IV of the RVAT, it was alleged by the Tax Department that there was tax evasion which led to initiation of proceedings under Sections 25, 55 & 61 of RVAT and the respondent firm was made liable to pay the differential tax of 8.5% for the assessment years, along with penalty and interest. The endeavours of the respondent No.1, assessee, before the Deputy Commissioner (Appeals) failed in terms of order dated 2.1.2009 and also before the Rajasthan Tax Board vide order dated 21.11.2012. This culminated in a revision petition being filed before the Rajasthan High Court which, however, reversed the views expressed by the forums below, in terms of the impugned order dated 3.2.2017. In arriving at such a conclusion, the High Court relied upon judgments of the Bombay High Court in Commissioner of Sales Tax, Mumbai v. India Gypsum Ltd.1 and the Supreme Court in The States of Gujarat v. Sakarwala Brothers2 as well as in Trutuf Safety Glass Industries v. Commissioner of Sales Tax, U.P.3 1 (2009) 25 VST 210 (Bom.).

(a) The manufacture of new drywall 4 See para 2.2 of the article ‘Life Cycle Analysis of Gypsum Board and Associated Finishing Products’ by George J Venta, The Athena Sustainable Materials Institute, Ottawa, Canada (March 1997).

22. We, thus, dismiss the appeals leaving it open to the parties to bear their own costs.

…….………………………….CJI.

JANUARY 08, 2019.