10 November 2021

‘Manufactured sand’ covered under ‘sand’ – Common parlance is the best way to classify goods

Applying the principle of common parlance, the Karnataka High Court has held that ‘sand’ includes ’manufactured sand’ in whatever name it would be called. The High Court was of the view that Notification dated 31 March 2015 was only clarificatory and would not disentitle the assessee to claim the reduced rate of tax at 5/5.5% under Entry 83 of the Third Schedule of the Karnataka Valued Added Tax Act.

The department had relied upon the said notification, reducing the rate of tax on manufactured sand to 5%, to conclude that prior to 31 March 2021, the ‘manufactured sand’ was liable to be taxed under the residuary entry at 14.5%.

Reading the specified Entry 83 which read as ‘sand and grits’, the Court observed that if the intention of the Legislature was to exclude ‘manufactured sand’, it would have made it clear in the entry itself.

The High Court also observed that the Assessing Authority had also concluded that the ‘manufactured sand’ and ‘river sand’ are construed as sand and that there is no difference between them, including their purpose or use. It noted that even the revisional authority and the Tribunal had in their orders impugned before the Court had observed that the ’manufactured sand’ is used for construction activity.

The Court in Robo Silicon Pvt. Ltd. v. State of Karnataka [Judgement dated 23 September 2021] also noted that the ‘Robo Sand’ i.e., ‘manufactured sand’ and the ‘river/natural sand’ were found to be having similar physical properties as per the report of a project sponsored by the Department of Mines and Geology, Government of Karnataka and conducted by the Department of Civil Engineering of the Indian Institute of Science.

Relying upon various Supreme Court decisions, the Karnataka High Court also noted that common parlance test is the best way to classify the goods vis-à-vis the determination of rate of tax and hence the test, as to what a common man viewing or dealing with the article will understand it to be, would be relevant.

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