Pranda Jewelry Pvt. Ltd. Vs. State of Maharashtra (Maharashtra Sales Tax Tribunal)
Maharashtra Sales Tax Tribunal Mumbai holds devotional images made out of gold to be taxable at the rate of 1% under MVAT Act, 2002 by referring to HSN, commercial parlance test, laboratory reports and dictionary meaning to decide the meaning of the word fineness under Schedule Entry B-1 of the MVAT Act, 2002.
FULL TEXT OF THE ORDER OF MAHARASHTRA SALES TAX TRIBUNAL
1. The present appeals are preferred by the Appellant for the Period 2010-11 under the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and the Central Sales Tax Act, 1956 (CST Act) against the Order passed by the Deputy Commissioner of Sales Tax, (Appeals- III), Mumbai who has dismissed the appeals by confirming the Assessment Order dated 30/10/2017.
Facts of the case :
2. The Appellant is a registered dealer under the MVAT Act, 2002 and CST Act, 1956 is a reseller of gold articles, silver articles and jewelry. The Appellant has an overseas branch under the name Pranda Jewelry Public Company Limited, Thailand and also has a Joint Venture Partner in India known as M/s Gunjan Jewels Pvt. Ltd. During the year in concern, the Appellant has sold articles known as ‘Prima Art’ which is claimed to be 2d karat, 99.99% purity images covered and protected from dust and moisture using intricate frame, glass, stickers and stand for easy mounting and display. It is claimed that Prima Art gold articles are masterpiece artwork, devotional images of various deities, saints, forms and symbols which respects the sentiments of all religions. During the period under consideration, M/s Gunjan Jewels Pvt. Ltd. has imported Prima Art articles from Pranda Jewelry Public Company Limited, Thailand and had cleared the goods by filing bill of entry for home consumption. M/s Gunjan Jewels Pvt. Ltd. sold these imported Prima Art articles to M/s Pranda Jewelry Pvt. Ltd., the present Appellant.
3. An investigation proceeding was carried out followed by asessment proceedings where the Assessing Officer proposed to by tax on the turnover of sales of Prima Art under the ‘Schedule Entry E-1’ (residuary entry), subject to tax at the rate of 12.5%. The Appellant has claimed in its returns that Prima Art articles are subject to tax at the rate of 1% under ‘Schedule Entry B-1’. The Appellant was asked by the investigation authorities to pay the differential tax rate liabilities which was denied by the Appellant. Consequently, Assessment proceedings were initiated by issuing Notice in Form 315 dated 20/02/2017 u/s 23(5) of the MVAT Act, 2002. The assessment order for period 1/4/2010 to 31/3/2011 was passed on 24/3/2017. In the said assessment order, the Assessing Officer has determined total liability at Rs. 97,97,363/- which includes tax liability of Rs. 49,35,699/- and interest liability at Rs. 48,61,664/- under the MVAT Act, 2002. Similarly, under CST Act, 1956, total liability of Rs. 2,11,79,194/- which includes tax liability of Rs. 1,06,69,619/- and interest liability of Rs. 1,05,09,575/-.
4. Aggrieved by t:he assessment order passed by the Assessing Authority an appeal was filed before the Deputy Commissioner of Sales Tax (Appeals- Ill) with detailed grounds of appeal and prayer. After considering the submissions made by the Appellant and perusing the case records, t:he Deputy Commissioner of Sales Tax (Appeals- III) has confirmed the Assessment Order with detailed reasoning and passed Appeal Order dated 30/10/2017. Further, aggrieved by the said Appeal Order, the Appellant has filed the present Second Appeals before the Tribunal.
5. Shri Ratan Samal, the learned Advocate appeared on behalf of the Appellant and Shri D. B. Deshmukh, learned Deputy Commissioner of Sales Tax (Legal) appeared on behalf of the Respondent.
6. Shri Ratan Samal, the learned Advocate made detailed written submission along with grounds of appeal along with factual details and judicial precedents in support of its claims. During the course of physical hearing, Shri Samal, has raised two propositions in his argument which are as under:
a) Whether the Assessing Officer is justified in passing an Assessment Order u/s 23(6) of the MVAT Act, 2002, when the Assessment Order for quantum assessment is hit by limitation period and whether he is justified in passing the said Assessment Order even though the prescribed Notice does not contain any proposition under which such Assessment Order has been passed ?
b) Whether the Assessing Officer is justified in taxing the impugned product, i.e., Articles of gold known as ‘Prima Art articles’ under the ‘Schedule Entry E-1’ (residuary entry) even though the some is subjected to tax under ‘Schedule Entry B-1 ?
7. The learned Advocate has submitted in respect of the first proposition, that t:he Notice in Form 315 issued u/s 23(6) dated 20/02/2017 is in a cyclostyle format wherein no propositions have been stated. A copy of the Notice was enclosed in the original Appeal Memo at page 28 as Exhibit ‘A. He has contended that Notice is the backbone of assessment proceedings, and thus, it should transpire the findings so that the dealer can present its say. In the absence of any specific proposition, any order passed would tantamount to violation of principles of natural justice. Over and above, he has argued that when the original assessment proceedings u/s 23(2) of the MVAT Act is hit by limitation, the said assessment comes to an end and the position in the returns is required to be accepted. The Assessing Officer cannot invoke assessment proceedings under other sub- sections. The learned Advocate further contended that the period of assessment is 2010-11 and in any case the assessment u/s 23(2) of the MVAT Act is to be made on or before 31st March, 2015. Since the assessment was not completed, the Assessing Officer was barred from conducting assessment under other sub- sections.
8. For the first propositions submitted by the learned Advocate, he has relied upon the judgment of Hon’ble Supreme Court in Commissioner of Central Excise, Bengaluru Vs. Brindavan Beverages Pvt. Ltd., (2007) 213 ELT 487 (SC) and Hon’ble Bombay High Court’s judgment in Godrej Industries Ltd. Vs. B.S. Singh, Deputy Commissioner of Income Tax & Others, (2015) 377 ITR 1 (Bom). By relying on these judgments, the learned Advocate has contended that the Notice in Form 315 was cyclostyle in nature and no propositions were made in the said Notice for assessment. Hence, the Assessment Order passed on the basis of such Notice was null and void.
9. For the second proposition, the learned Advocate submitted that ‘Prima Art articles’ are 24 karat gold with 99.9% purity of devotional images of deities, saints, forms and symbols and are framed to protect the articles from dust and moisture. He further submitted that the price of the product roughly starts from 1NR 2,500/- and goes up to INR 2.5 lakhs. Such heavy price is charged mainly for the pure gold articles and such Prima Art articles are available only at jewelry shops, sold by the Appellant through Ills distributors. During the hearings the Advocate had furnished brochures and price catalogs of the product. He has also physically displayed few samples of Prima Art articles during the course of hearing. He further submitted that the products are sold with purity certificates with 75% buy- back guarantee. He has submitted that the Joint Venture company, M/s Gunjan Jewels Pvt. Ltd. has imported from the company at Thailand of the Appellant and he has brought on record import transaction details that include bills of entries during the period in concern, made by M/s Gunjan Jewels Pvt. Ltd. He has also brought on record purchase registers and tax invoices of the Appellant which reflect purchases from M/s Gunjan Jewels Pvt. Ltd.
10. Shri Samal, learned Advocate submitted that during import most of the Prima Art articles are cleared under Customs Tariff Entry 71141910. However, very few bills of entries have been cleared under Customs Tariff Entry 71141110. It was submitted that the Appellant seems to have overlooked the same while Customs clearance since the rates of Customs Duty under Tariff Entry 71141910 as well as 71141110 are the same. But it was also submitted that almost 99% of clearances were made under Tariff Entry 71141910.
11. Shri Samal, learned Advocate submitted that,-
‘Schedule Entry B-1’ appended to the MVAT Act, 2002 reads as,-
“Articles made of precious metals of fineness not less than 50% whether or not containing precious stones, semi- precious stones, diamonds or pearls whether real or cultured and to which entry 105 in Schedule C does not apply”.
He also submitted that the Schedule Entry C-105 contains the following items’.,-
“jari and embroidery materials of gold, silver and glided metals, badla and kasab”.
It was further contended that the term “precious metals” and “fineness” is not defined under the MVAT Act, 2002 and thus, reliance had to be placed on external materials and expert opinions where such words are defined.
12. The learned Advocate stated that as per the Bureau of Indian Standards (BIS), fineness stands for the ratio between the mass of gold contents and the total mass expressed in parts per thousand. Fine gold means, it is gold having fineness of 999 parts per thousand and above without any negative tolerance. He further stated that the World Gold Council defines fineness as, another way of expressing the precious metal contents of gold, jewelry and represents the purity part per thousand. It was also submitted that as per Concise Oxford Dictionary, Tenth Edition, ‘fine’ means “of very high quality, satisfactory (of gold or silver) containing a specific high proportion of pure metal”. As per the Money Control website, “fineness” is the purity of precious metals measured in thousand parts of an alloy. For instance, a gold bar, of point 995 fineness means 995 parts of gold and 5 parts of another, metal. Shri Samal has also brought on record various laboratory’s report on Prima Art articles such as ELCA Laboratories’ test report (page 90 of Appeal Petition), Hem Assaying & Hallmarking Center Gold & Silver’s test report (page 92 of Appeal Petition), Omkar Lab Testing & Manufacturing’s test report (page 94 of Appeal Petition), Varsha Buillion & Elemental Analab’s test report (page 96 of Appeal Petition) and Vitthal Assaying & Hallmarking Centre’s test report (page 98 of Appeal Petition). Shri Samal contended that all these laboratories have tested the Prima Art. articles and had reported that the purity of such gold articles are between 99.93% to 99.98%. By showing such laboratory reports, it was contended that fineness is nothing but purity contents of the gold articles.
13. The learned Advocate submitted that the Legislature, keeping in mind the purity, inserted ‘Schedule Entry B-1’ wherein they have intended to put the articles made of precious metals should contain fineness not less than 50%. Legislature has never intended to place the weight of the gold articles or precious metal articles. He further contended that both the learned Assessing Officer and Appellate Authority has misconstrued the term fineness in Schedule Entry B-1. Shri Samal has shown us page 3 of the Assessment Order wherein the Assessing Officer has observed as under:
“The Frames which are sold by M/s. Pranda Jewelry Pvt. Ltd. dre not the articles of gold as covered by the schedule entry B-1. The reasons for this understanding as under:
A) Gold plated Images- by electro forming of idols process making the figure hallow from inside a very thin layer of gold is put on the same having 200 ml of Pure gold per square inch. Fineness of gold should be expected; for compact effect of the product, In said case whatever dealer describing it as article of gold is not proper, here quantity part for fineness of gold is relatively very small part of the total product and not about whole product.
B) The schedule entry B-1, speaks of article of gold and silver and it intends to cover finished products of gold like ornaments, jewelry etc. To fall in the entry the article should be made of precious metal, a content of 10% to 20% of gold would not be qualify the impugned product to be called and article of gold.
C) The Prima Art is not article of Gold, it is article made of precious metals. In the present case, it is seen that many materials go into the making of the finished products and quantum of gold used cannot be said to be such that it is an article of Gold.
D) ) Brief note on Central Excise Tariff Code 7114 1910
7114- Article of Goldsmiths or Silversmiths Wares and Part Thereof, of Precious Metal or Metal Clad with Precious Metal
7114 19- of other precious metal, whether or not plated or clad with precious metal
7114 1910- Articles of gold.
For the purpose of headings 7114, the expression ‘article of goldsmith or silversmith wares’ includes such articles as ornaments, table ware, smokers requisites and other article of house hold, office or religious use. As per section XIV (chapter 71) 2A, Headings 7113, 7114 and 7112.5 do not cover articles in which precious metal or metal clad with precious metal is present as minor constituents only, such as minor fittings or minor ornamentation (for example-monograms, ferrules and rims)
It can be seen from above that even central excise does not consider minor constituents as being said to be article of precious metal, the entry does not make any reference to the classification under excise Hence, the excise classification should not be parameter to interpret the words ‘Article of precious metals’
E) The products would not be eligible to fall in the entry B-1, In absence of a specific entry, the residuary entry, would come into’ picture.
F) Gold is part of product and the product is not an article of gold
D) It is sold as gift article and not as gold articles.
E) The entry makes use of the words
Though the golden image contained in the frame has fineness of more than 50% but the image is tiny part of the whole product. By weight or by value the cost of gold used is, in most of the cases, in less than 1% of the total cost of the product sold. The Chart shown below “shows the clarification of cost of frames of different sizes /types in said products.
The. said Prima Art Gold articles are classified by under Schedule Entry B-1 which says that articles made of precious metals of fineness not less than 50%. As mentioned aforesaid, that the in said Prima Art, part of article have fineness of 99.90% Gold i.e. 24 Karat, but fineness of gold contains at small area only and not fulfilled the definitions of article of gold.
24 Karat Gold meaning
Karat is a measure referred to purity of Gold in parts thereof. 24 Karat Gold is highest purity of Gold. The highest purity of gold is 99.99 percent pure Gold. In Indian standards the accepted form of 24 karat Gold is 99.50% purity, also called as Standard Gold in India there is also acceptability and availability of 24 karat Gold with 99.90% purity called as Fine Gold.
Therefore, as per INV officer (D-007) view, whole product (frames) should not be treated as Articles of Gold, it should not come in schedule entry B But should be treated in schedule entry E-1, and should taxed at @12.5%. In said products (frames) fine gold contains is very minor by volume, by weight, and by value, Specimen chart of comparing the weight and value of actual gold used in said frames are as below-
