The Andhra Pradesh High Court held that the mere use of chemical as raw materials does not detract its character and attracts 8% Tax. It was observed that all the goods in question would have to be taxed only @8% as they are chemicals and the usage of these chemicals as raw materials would not detract from the categorisation of these goods as chemicals.
Matangi Traders , the assessee/petitioners is a dealers of Sodium Bicarbonate (Soda Ash) and Magnesium Sulphate (Epsom Salt), were assessed under the Andhra Pradesh Goods and Services Tax Act, 2017. The assessee argued that, based on G.O.Ms.No.189 (dated 07.02.2005), these chemicals should be taxed at 8%, as they were not listed under Entry-9 of “Dyes and Chemicals”.
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The Assessing Officer partly accepted this claim and some goods were taxed at 12%, claiming they were not covered by the G.O. The assessee filed an appeal against the assessment order. The Appellate Deputy Commissioner allowed the appeal, revising the tax rate to 8%. However, the Revisional Authority later overturned this decision, imposing a 12% tax.
The assessee challenged the order passed by the Revisional Authority before the High Court. It was submitted that the goods would not lose their character of chemicals merely because they were used as raw material in manufacture of other goods and the finding of the Revisional Authority that the nature of the goods would change from chemicals to other goods which do not fall within the purview of G.O.Ms.No.189, dated 07.02.2005 is not based on any logic or provision of law.
The department argued that the goods in question cannot be treated as chemicals merely because they can also be called by their chemical names. The Revisional Authority after looking at the purpose for which the goods were purchased in the market had held that these should be treated as raw materials and not chemicals.
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The bench stated that the G.O. directs a levy of sale tax at 8% on all chemicals which are not covered under Entry-9 which is headed as dyes and chemicals. A perusal of Entry-9 would show that the goods mentioned above are not enumerated in Entry-9.
It was observed that in a similar case from the Andhra Pradesh High Court at Hyderabad, M/s. Velivennu Primary Agricultural Co-op. v. The Commercial Tax Officer No.II, Tanuku, the bench held that any chemical not listed under Entry-9 of the VI Schedule would fall within the scope of G.O.Ms.No.189, dated 07.02.2005, and would therefore be taxable at 8% only.
The Division Bench of Justices R. Raghunandan Rao and Harinath N. observed that the G.O.Ms.No.189, issued on 7th February 2005, revises the tax rate on the sale of “All Chemicals” (excluding Calcium Carbide) in Andhra Pradesh under the Andhra Pradesh General Sales Tax Act, 1957. The notification clarifies that from 30th September 2004, the tax rate on the sale of these chemicals would be 8%. However, this reduced tax rate applies only to chemicals that are not listed under a specific category called “Entry (9) of Dyes and Chemicals”.
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While allowing the petition, the bench held that all the goods in question would have to be taxed only @8% as they are chemicals and the usage of these chemicals as raw materials would not detract from the categorisation of these goods as chemicals.
In view of the above, the bench set aside the assessment order.
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