5 % VAT Leviable on Sale of Liquid Carbon Dioxide: Andhra Pradesh HC [Read Order]

The Andhra Pradesh High Court’s Division Bench comprising Justices R Raghunandan Rao and K Manmadha Rao held that 5 % Value Added Tax (VAT) is leviable on the sale of liquid carbon dioxide.

The question at hand was whether pure liquid carbon dioxide gas should be taxed at 14.5% rather than 5% since it is categorized as an unclassified good under Schedule-V of the VAT Act. The assessee/petitioner, Punjab Carbonic (p) Ltd, buys carbon dioxide and produces liquid carbon dioxide by scrubbing, purification, drying, filtering, and liquefaction. It then sells the dry ice and refined liquid carbon dioxide.

For the period of February 2016 to June 2017, the assessee, who was registered under the Andhra Pradesh Value Added Tax Act, 2005, reported the turnovers related to the aforementioned products and paid tax at a rate of 5% on the turnover of carbon dioxide gas and 14.5% on the sale of dry ice.

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The Assessing Officer issued an assessment order for the months of February 2016 through June 2017 after accepting the aforementioned tax rate in connection with the sale of carbon dioxide.

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In a notice of revision, the Joint Commissioner (2nd Respondent) asked the assessee to provide justification for why the turnover associated with the sale of liquid carbon dioxide should not be subject to a 14.5% tax. The Joint Commissioner only noted in the show cause notice that pure liquid carbon dioxide gas is subject to 14.5% taxation rather than 5% since it is categorized as an unclassified good under Schedule-V of the VAT Act.

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According to the assessee, liquid carbon dioxide is subject to a 5% tax rate and is classified as Entry-100 (190) in Schedule IV of the VAT Act. The assessee argued that "other inorganic acids and other inorganic oxygen compounds of non-metals" occurring under HSN Code Heading No. 2811 were covered by Entry 100(190).

The bench noted that carbon dioxide and other inorganic oxygen compounds of non-metals, as well as other inorganic acids, would undoubtedly be classified as commodities under Entry 100(190) of Schedule-IV. Although additional products are listed under the primary heading (No. 2811), this does not imply that carbon dioxide is not included in that heading.

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Carbon dioxide is particularly mentioned in Heading No. 2811 21; nevertheless, it should be noted that there is no requirement that it be in a gaseous state. According to the bench, carbon dioxide, whether in liquid or gaseous form, would be covered by HSN Heading No. 2811 and Entry No. 100(190) of Schedule-IV of the VAT Act if there were no such restrictions.

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While allowing the appeal, the bench disagreed with the contention of the department that a declaration has to be obtained from the purchaser of carbon dioxide to obtain concessional rate of tax available to such products and set aside the order of revision.

To Read the full text of the Order CLICK HERE

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