ARA order of M/s. Nandi Marketing
|1.||Name the applicant||Nandi Marketing|
|2.||Address||Building No. A3(GaIa No.6Krishna industral Paric
off Mumbai Nasd Highway,Sonae.Bhwandi-4213O2?
|4.||Details of applicant||ARA No. 159 dated 03.07.2017|
|5.||Jurisdictional Assessing Authority||KAL-VAT-E-005 and AC(D-003). Investigation. Thane|
|6.||Heard||Mr R C Thakar.(Advocate)|
|8.||Advance Ruling Authrity||Shfl. ACH. Rathod (Chaman), v.V. Kulkarni
(Member). A A. Chahure (Member)
ORDER NO. ARA159/2017-l8/Disp. Reg. No.33 Dated 29.09.2017
(Order under section 56(5) and 55(9) of the MVAT Act, 2002)
The applicant M/s. Nandi Marketing has applied for determination of rate or tax on the various products under section 55 of MVAT ACT, 2002. The applicant is a reseller The investigation unit visited the place of business of applicant and raised points that applicant has paid less tax by paying tax with incorrect rate of tax on certain products. Due to his observations of the investigation unit the applicant has filed this application.The list of products is enumerated in Tabular Format in Table-I.
|Sr No.||Product discription||Classification adopted by NM|
|1.||Baby Walker||C-107 (14)|
|2.||Push pull Ride on||C-107(14)|
02. THE FACT OF CASE:.
a) The applicant has attended and submitted the related documents, broachers The applicant has shown the samples of products to the authority. He has Informed the nature of products and its description as under.
(i) Baby walker: The baby walkers are generally meant for kids of age group between 4 and 12 months and it is an object meant for the kid to engage in an activity for enjoyment and recreation rather than serious or practical purposes
ii) Push Pull car: These are toy cars meant for kids for entertainment and playing This toy is manually operated unlike battery powered toy cars. The car has various designs and music system with LED lights. These cars require physical push or pull method for moving around and playing while kid is seated on the car.
iii) swing car: These are toy cars for kids, predominantly made of plastic. This type of cars has three or more wheels and a steering wheel The kid sits on the car and play by merely twisting steering in semi-circular motion which in turn activates the movement of the swing car. The swing car may or may not have music playing through the steering wheel which is solely for attracting the attention of children.
iv) Kick scooter : Kick Scooters are played by keeping one foot on the deck and other foot powers momentum by kicking on the floor. This toy is made from alloy or steel or by combination of both. This toy can have two or more wheels Some of these wheels are equipped with LED lights.
v) Baby Tricycle : Baby Tricycles are manually pedalled or pushed for kids to play. Some of the tricycles which are equipped with lights, music, homs etc., empowered by simple dry cell batteries to enhance the safety and gaiety to the kid.
vi) Kids Cycle : This is a smaller version of a regular cycle with a pair of safety rollers meant for kids who cannot balance and ride a cycle Independently These cycles are provided with two detachable side supporters with rollers on the rear in order to develop the balancing skills mi riding the cycle without any assistance from parents/guardian.
03.The submission and contention of applicant:
M. R. C. Thakar, Advocate attended and argued the case He has also filed written contention. The applicant has shown the sample of products to the authority.
3.1 The applicant has informed that the above items are manually powered and it is fully functional even without batteries or electronic circuits. wherever electronic circuits are available it is dedicated only for enhancing the entertainment through music I light/horn etc., and in no way it interferes with operational features of the toy/cycle The products shown to us have music system, music horn and lightening, which is useful to play, attract and please the children The products are empowered
by dry cell batteries.
a) The applicant has stated that the products at Sr. No 1.4 in Table shown above shall be classifiable under Schedule Entry C – 107 (14). The said products are bought by the customers for child to play with . the said schedule Entry C-107 (14) specifies toys and games ‘excluding electronic toys and electronic games’ Since the word ‘toys is not defined under the MVAT Act. 2002 the said words will have to be construed based on the ordinary meaning of the word and as per the settled legal principle applicable for interpretation of a word in a taxing statute. It is argued that common parlance. toys means things to play with specifically for a child. There is no doubt that In the present case the products listed at Sr. no. 1-4 of Table- I are for things with which a child learns to play.
b) The applicant has stated that the product baby tricycle at Sr. No 5 of the Table – 1 is correctly classifiable under the schedule Entry C- 14 which specifically species tricycle. The word tricycle is not defined under the Act Thus, in the absence of any definition the Court shall have resort to the commercial parlance theory or the dictionary meaning of the term In the commercial parlance theory, the baby tricycle is covered by the term tricycle. Even the dictionary meaning of the term tricycle mean bicycle similar to a bicycle. but having three wheels. two at the back and one at the front As per the dictionary meaning of the term tricycle, the product is classifiable under Entry c – 14. Thus, it is argued that the applicant has correctly discharged tax.
(C) It Is stated that alternatively, the said baby tricycle is classifiable as toys under Schedule Entry C – 107 (14), since the said tricycles are only meant for playing by the kids Thus, it will fall under the commercially understood dictionary of toys” Further the said tricycles are normally sold at a toys store
(d) The applicant has submitted that the product kid cycle at Sr. No 6 is a classical bicycle with detachable small wheels to the rear end termed as training wheels. The sad detachable wheels can be removed as and when required. The said detachable wheels help the kid to learning balancing a bicycle. Once the kid has learnt riding a bicycle the side wheels can be removed. The applicant has stated that the term bicycle is not defined under the MVAT Act. 2002. Thus, as per the popular meaning and in commercial parlance, the said kids cycle is bought and sold in the market as bicycle only
3.2 The legal submission of the applicant.
Mr. R. C. Thakar Advocate. has stated mat the Schedule Entry C -107 (14) specifies “Toys and games ‘excluding electronic toys and electronic games’ At this point it is pertinent to note that the MVAT Act. 2002 does not define the word toys. Thus, the words not defined in the act will have to be construed based on the settled legal principles He has argued for the legal provisions and stated that the product must be understood in common parlance or with the dictionary meanings He has invited our attention towards various court decisions which are mentioned as under.
a) The supreme court In the case of Indo International lndustries Vs. Commissioner of Sales Tax, UP — (1981) 47 STC 359 (SC) held that in interpreting items in statutes like the Excise Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products. articles and substances resort should not be to ‘the scientific and technical’ meaning of the terms or expression used but to their popular meaning that is to say. the meaning attached to them by those dealing in them. Further. Hon. Supreme Court in the case of Ramavatar Bhuadaiprasad Etc. vs Assistant Sales Tax Officer, Akola —(1961) 12
STC 286 (Sc)held that ii a word is used in a taxing statute. it has to he understood as in common parlance.
b) Th. Hon. supreme court in the Case of Commissioner of Sales Tax, Madhya Pradesh vs Jaswant Singh charan Singh — (1967) 19 STC 469 (SC) while considering the question of whether the word ‘coal’ covers charcoal, held that the meaning of the ‘word’ coal in the statute as understood in its commercial or popular sense would include “charcoal” The Apex Court upheld the decision of High Court wherein the High Court had observed that while construing entries in a statute like the Sales Tax Acts, the Court should prefer the popular meaning of the terms used in such entries and not their dictionary meanings and that so construed charcoal would be included in the word ‘coal’
c) The Hon. supreme Court in the ease of Commissioner of central Excise vs. Connaught Plaza Restaurant (P) Ltd. — (2012) 13 SCC 639 (SC) was concerned with the question of whether the soft serve Ice cream would be covered under the term ice cream. The Apex court held that ice cream would cover the soft service cream The Apex Court held that in the absence of a statutory definition in precise terms: words. entries and items in taxing statutes must be construed in terms of the commercial or trade understanding. or according to their popular meaning. In other words, they must be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it.
d) Mr. P. C. Thakar, Advocate stated that dictionary meaning is one of the valuable aid for legal interpretation and thus impugned products are toys. He relied on the Hon. Supreme court judgment In the case of Ponds India Ltd vs. commissioner of Trade Tax, Lucknow — (2008) 15 VST 256 (SC). Further, he argued that the dictionary meanings of the term ‘toy’ it can be inferred that toy is something for a child to play with The term toy is given a widest possible meaning and to include any object for a child to play with It is not restricted to a particular kind of toy like soft toy or a doll, etc It includes within its ambit any and every kind of object with which a child can play Thus. even as per the dictionary meaning of the term ‘toys’ the products listed at Sr No. 14 are classifiable under C – 1o7 (14)
e) Mr R.C. Thakar Advocate has slated that it is also relevant to note the settled the words in a statute are plain and clear, there is no room for applying any of the principles of w-interpretation which are merely presumption in cases of ambiguity in the statute. where there Is no ambiguity, the words not defined must be given the most natural and widest possible meaning to arrive at the true interpretation of the statute In view of the above settled legal principles, it is submitted that the Applicant has correctly classified the products in question under the relevant entry as per the popular and commercial meaning of the products It is submitted that m common parlance, toys means things to play with specifically for a child There is no doubt that in the present case the products listed at Sr no 1-4 of rule are for things with which a child earns to play. The said products are bought by the customers for child to play with it.
The baby walker is to assist the walking milestone of baby. It is also submitted that. the fact that a baby walker is useful in assisting a baby to learn to wall does not take it out of the category of toys That only implies that the said baby walker is an educative toy which along with the purpose of playing also helps the baby to learn to walk Further, it is not uncommon of toys having some or the other educative value to it, thereby allowing the kids to learn new things while playing with it. He stated that the said products are commonly sold In toy stores only. The said products are such as push pull ride on or kick scooter are used by the children to play with in open areas The said items are not used as any kind of transport medium to transport children from one place to another, The sole purpose of such toys is for the children to play with it. Hence, they are correctly classifiable as toys.
Thus. ii view of the above submissions, the Applicant submits that. commercially and popularly, the products sold by the Applicant are characterised as toys only The aforesaid products are sold in toy stores only and people buying the said product perceive them as toys only Hence, the said products have been correctly classified by the Applicant as toys under C- 107 (14)
f) The music and light are merely incidental features:
Mr. R. C. Thakar, Advocate explained that the music and light generated merely an incidental features and are far entertainment of small kids. It does not make the products as electronic toys The music and light cannot be considered as essentially characteristics of the products. The products are manually powered and not electronically operated toys. when the legislature excluded electronic toys. it meant to exclude the toys, the essential characteristic of which is the electronic operation of the toys and without which the toys cannot be operated Hence, the said products cannot be excluded and shall be classifiable as toys under Schedule Entry C — 107 (14).
The said products will function even without the music and light. The above difference between a manual toy and an electronic toy can be lucidly explained by way of an example of motor car, A motor car runs on either diesel engine or petrol engine But still the said motor car will contain battery for ignition, lights horns. etc. Just because the motor car has a battery in it. doesn’t make it an electronic car operating on battery. The main engine driving the car still runs on the combustion motor. That motor car is still called as a petrol car or a diesel car and certainly not an electronic car. As against a petrol car or diesel car, due to recent advancement of technology, we can find new electronic cars on road which purely work on electric motors powered by batteries. The aforesaid kind of ears is called as electronic cars. There is a stark difference between the electronic cars and the petrol I diesel cars same as normal toys and electronic toys.
g) The baby bicycle (product at Sr. no. 5 above):
(i) The Applicant has submitted that. the product baby tricycle is correctly classifiable under the Schedule Entry C— 14 which specifically specifies tricycle.The Applicant submits that the word tricycle is not defined under the Act. Thus, in the absence of any definition the court shall have resort to the commercial parlance theory or the dictionary meaning of the term. It is Submitted that, in the commercial parlance theory, the baby tricycle are covered by the term tricycle. Further, he stated that the dictionary meaning of the term tricycle means a vehicle similar to a bicycle. but having three wheels. two at the back and one at the front. As per the dictionary meaning of the term tricycle, the product is classifiable under Entry C- 14.
(ii) Alternatively. the said baby tricycle is classifiable as toys under schedule Entry since the said tricycles are only meant for playing by the kids. Thus, it will fall under the commercially understood dictionary of toys Further the said tricycles are normally sold at a toys store
h) The Product, bicycle (at Sr. No. 6 ):-
The Applicant submits that the product kids cycle is a classical bicycle with detachable small wheels to the rear end termed as training wheels The sad detachable wheels can be removed as when required The said detachable wheels help the kid to learning balancing a bicycle. Once the kid has learnt riding a bicycle. the detachable wheels can be removed, The said bicycles even with the detachable wheels are considered as bicycle only in the trade parlance. The said bicycle by stretch of imagination cannot be considered as a four wheeler, The Applicant submitted that the term bicycle is not defined under the MAVAT Act, 2002 Thus as per the popular meaning and commercial parlance, the said kids cycle is bought and sold in the market as bicycle only.
i) The legal submission for electronic goods:
(i) The Applicant further relied on the decision of Maharashtra Sales Tax Tribunal in the case of M/s. Shetra Time (P) Ltd. Vs. The state of Maharashtra — Second Appeal No. 46 to 49 of 2005 vide order dated 4.9.2007 following the judgment of Supreme Court in the case of BPL Limited held that electronic goods TM means that systems. instruments, appliances, apparatus, and equipment which are electronic and operate on electronic principle would be electronic good. The said observation of the Tribunal is relevant for interpreting the term electronic “toys”. Thus toys principally works on electronic system should be considered as electronic toys.
(ii) The Applicant further relies on the judgment of the Hon Supreme Court in the case of xerox Modi Ltd. vs. commissioner of customs. Mumbai — 2010 (260) ELT 161 (SC) and Hon. Madras High Court in the case of canon India (P) Ltd. vs. state of Tamil Nadu – (2015) 80 VST 453 (Mad), where in the Hon. Courts held that a Multi Function Printers having facilities of printing. scanning. fax. etc is predominantly classifiable as Printer only and not classifiable under residuary heading. The Courts held that the classification of goods cannot be made by splitting the functions of the multi- function machine. What is relevant is the nature of the equipment and its predominant use. In the present case, since the predominant functions of the toys are to operate manually, the said toys will not classify as electronic toys.
(j)The specific Entry has to be preferred over residuary entry:-
(i) The Applicant submitted that since aforesaid products are specifically covered under Schedule Entry c- 107 (14) and c – 14, the aforesaid products cannot be classified under residuary heading. In Indian Metal Ferro Alloys Ltd. vs. CCE – 1991 (51) ELT 165 (SC), the Supreme Court dealt with classification of electric poles, as to whether they are liable to duty under Tariff 26A as pipes tubes or under item 68 of the erstwhile First Schedule of Central Excise Act Tariff item 68 covered all the goods not elsewhere specified. The Supreme Court rejected the classification under residuary tariff tern 68 claimed by the department Para 16 of judgment was as under:
“it is a settled principle that unless the department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the specific items mentioned in that tariff, resort cannot be had to the residuary items. see the Bharat Forge case (supra). This certainly is not the position in this case, particularly in the light of the department’s own understanding and interpretation of Item 26AA.*
(ii) The applicant also relied on the judgment in the case of state of Maharashtra vs. Bradma of India Ltd. – 2005 (140) STC 17 (SC) and stated that the Hon. Supreme Court reiterated that one can resort to residuary heading only when a Iiberal construction of the specific heading cannot cover the goods in question.
3.3 Prospective effect:-
The applicant has prayed for prospective effect to the Order, if Advance Ruling Authority of different opinion and determining that the products sold by the applicant are liable to tax at higher rate.
04 The Discussion and Analysis:
To ascertain these claims, it is necessary to understand the schedule Entry under which applicant has discharged tax liability for impugned goods According to Applicant, the following Entries under the Schedules of MVAT Act are relevant to be considered for the purpose of determination of the correct classification of the products under the MVAT Act. 2002.
4.1 The Relevant Schedule Entries are reproduced as under;•
|Sr. No.||Schedule Entry||Name of the commodity||Rate of tax|
|1||C -14||Bicycle, tricycles, cycle rickshaws and parts.
components and accessories and tyres and
|2||C – 107(14)||Toys and games excluding electronic toys
and electronic games
|3||E – 1||All goods not covered in any of the other
The Applicant has stated that the products at (Sr.. No. I to 4) in the table are covered by the schedule entry C-107(14) of MVAT Act 2002.The schedule entry reads as Toys and games excluding electronic toys and electronic games”.
we have perused the schedule entry. The two criteria have been laid en the schedule entry First, it must be Toy and second .s it should not be electronic Toy The products must satisfy both the criteria to include them in the scope of schedule entry is in electronic in nature then it is excluded from the schedule entry The electronic is nature is a very important. The product having the electronic features which is concern to user by any means is to be referred as electronic goods. The Legislative intention behind the exclusion of electronic toys from scope of this schedule entry is that toys which have some luxury and modem facilities like music, light etc and which facilities can only be Incorporated by corporate manufacturers using electronic circuit boards as an essential parts or component of the goods sold rather man ordinary artisan. Hence, the law makers have Intentionally and clearly excluded the goods like electronic toys from scope of the Schedule Entry 107(14).
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