M/S. M.P. AGENCIES versus STATE OF KERALA

Citation: [2015] 2 S.C.R. 1061 · Decided: 18-03-2015 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2015] 2 S.C.R. 1061 
M/S. M.P. AGENCIES 
v. 
STATE OF KERALA 
(Civil-Appeal No.1440 of 2010 etc.) 
MARCH 18, 2015 
[DIPAK MISRA AND ABHAY MANOHAR SAPRE, JJ.] 
Kerela Value Added Tax Act, 2003 - s. 6 - Levy of tax 
A 
B 
c 
- Classification of goods - "Ujala Supreme" and Ujala Stiff 
and Shine - Appellant distributor for "Ujala Supreme, fabric 
whitener" and Ujala Stiff and Shine, liquid fabric stiffener 
which are manufactured by an industrial unit- Levy of tax D 
- Held: Manufacturer-industrial unit purchases central 
excise duty paid acid violet paste-AVP classifiable under the 
heading 3204.12.94 and thereafter, the AVP is diluted in 
water and filled in plastic contqiner and then sold under the 
brand name of 'Ujala' - Chemical examiner's report is to 
E 
the effect that it is a physical mixture of the ingredients in 
boiling water which has been given after study of the 
manufacturing process - It was in accordance with the Tariff 
Ruling of the Board - It is found from the test reports that 
there is only dilution in water and the same does amount F 
to or result in manufacture and hence, no new product 
emerges -
Thus, the common parlance would come into 
play -
Two goods/products are covered under the HSN 
Code 3905, and HSN Code 3204.12.94 and thus, the said 
entries fall under entry numbers 155(8)( d) and 118(5) of the G 
list 'J!\" of Third Schedule of the 2003 Act covering industrial 
inputs and packaging materials - As such entry 103, which 
1061 
H 
1062 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A is residuary in nature, would not get attracted - Tax rate 
as stipulated in the Schedule, applicable to the Entries 
would be applicable. 
Hannonised System of Nomenclature (HSN) - Primacy 
B of - Held: Where the commodities have been given HSN 
numbers, the same meaning would be given for 
classification under the Customs Tariff Act, 1975 - Where 
commodities are not ascribed any HSN number, they would 
be interpreted as understood in common or commercial 
C parlance - In case of inconsistency between meaning of a 
commodity without HSN number and a commodity with HSN 
number, the commodity without HSN number should be 
interpreted by including the commodity in that entry, which 
has been given HSN number - Thus, primacy is given to 
D HSN number classification and adoption/interpretation of 
HSN classification under the Customs Tariff Act, 1975 and 
any inconsistency or debate would be decided with the 
commodity being categorized against the HSN number. 
E 
Allowing the appeals, the Court 
HELD: 1.1 Section 6 of the Kerela Value Added Tax 
Act, 2003 deals with the levy of tax on sale and 
purchase of goods and provides various facets. It 
F applies to an importer, casual trader, agent of a non-
resident dealer, dealer in jewellery or gold, silver & 
platinum group metals or silver articles or contractor 
of State Government or the Central Government, etc. 
regardless of the turnover. Under Clause (a), in respect 
G of the goods specified in the second and Third 
Schedule, tax is payable at the rate specified in the said 
schedule. Tax is payable at the point of sale. Under 
Clause (d), goods not falling under Clauses (a) or (c), 
tax is payable at the rate of 12.5% at the point of sale 
H within the State. The legislature has conferred the 
M/S. M.P. AGENCIES v. STATE OF KERALA 
1063 
power on the Government to notify a list of goods A 
taxable at the rate of 12.5%. Harmonious construction 
of Clause (a) and (d) clearly demonstrates that in case 
of notified goods, the rate of tax would be 12.5%. 
Similarly, in case of goods not falling under Clause (a), 
that is Second and Third Schedule, the rate of tax would B 
be 12.5%. This does not necessarily mean that 
exempted goods would be taxable by virtue of Clause 
(d). [Para 17] (1080-A-F] 
1.2 From the Rules of Interpretation of Schedules, c 
it is luculent that the commodities mentioned in the 
schedules have been allotted code numbers developed 
by International Customs Organisation, which is known 
as Harmonised System of Nomenclature (HSN). The 
same has been adopted in the Customs Tariff Act, 1975. o 
Where the commodities have been given HSN numbers, 
the same meaning would be given for classification 
under the Customs Tariff Act, 1975. The rules accept 
.that for certain entries, HSN numbers are not given. 
Where commodities are not ascribed any HSN number, E 
they would be interpreted as understood in common or 
commercial parlance. In case of inco

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