M/S Linde India Ltd vs The Assistant Commissioner
2023 Latest Caselaw 4659 Raj/2

[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

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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

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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

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