The central legal point established in the judgment is the interpretation of the material used in the footwear and its alignment with the entries in the Third Schedule of the Karnataka Value Added Tax Act, 2003, to determine the correct classification and tax rates.

(Per R. Gururajan, J.)

M/s. Preston India Private Limited is before us aggrieved by the Advance Ruling/Clarification Order dated 30.9.2005 - Annexure-B. The following questions of law are framed in terms of the pleadings.

1. Whether, on the facts and in the circumstances of the Appellant's case, was the Respondent - Authority justified in law in holding that "EVA Footwear" was liable to tax at the rate of 12.5% as non-scheduled goods falling under Section 4(1) of the Act, for the period pertaining to 7.6.2005 onwards ?

2. Whether, on the facts and in the circumstances of the Appellant's case, was the Respondent - Authority justified in law in holding that "Walkie Chappals" was liable to tax at the rate of 12.5% as non-scheduled goods falling under Section 4(1)(b) of the Act, for the periods between 1.4.2005 to 6.6.2005 ?

Appellant is engaged in manufacture of Chappals at its unit in Bangalore. Entry 47 of the Third Schedule appended to the Act as it stood between the periods 1.4.2005 to 6.6.2005 would read as "Plastic Footwear" for the purpose of levy of tax. It was subsequently substituted by Karnataka Act No. 27 of 2005. The substituted provision came into force with effect from 7.6.2005. Entry 64 would read as under :

"64. Moulded Plastic Footwear, Hawai Chappals and their straps".

The Appellant manufactures footwear known as "Walkie Chappals", the sole of which is made up of two layers; the upper layer consists of Ethylene Vinyl Acetate (EVA) which is a Plastic Polymer and the bottom layer is made up of Rubber Sheet. The Strap of the footwear which is also called as upper, is made of Man-made Fabric with plastic coated on it. The assembling is done by pasting the bottom layer, the upper layer and the upper together using adhesives like Neoprene Bond and P.U. Adhesive. According to the Appellant, Walkie Chappal was taxable under Entry 47 of the Third Schedule as it stood between the periods 1.4.2005 to 6.6.2005 at 4% and with effect from 7.6.2005, at 12.5%.

The Appellant also manufactures footwear called as "EVA Footwear". It is made up of Moulded Plastic Footwear wherein two pieces of plastic which pertain to Sole and Strap made of Ethylene Vinyl Acetate (EVA) Polymers are moulded together with a stud which is made up of PVC Compound being inserted in the northern end of the footwear so as to enable the principal toe and the toe next to it of the wearer to have a firm grip while using the said footwear. Entry 47 of the Third Schedule as it stood between 1.4.2005 to 6.6.2005 provided tax at 4% and thereafter, it was covered under Entry 64 of the Third Schedule.

The Appellant made an Application before the Authority for Clarification seeking advance ruling/clarification on the above referred facts. After hearing, the Authority has chosen to pass the following order.

"8. In view of the above, we made the following ruling. -

Applicability of rate of tax on -

--------------------------------------------------------------------------- (i) EVA Footwear from 4% Sl. No. 47 of Third Schedule to 1.4.2005 to 6.6.2005 the KVAT Act, 2003 --------------------------------------------------------------------------- (ii) EVA Footwear for the 12.5% under Section 4(1)(b) of the period from 7.6.2005 Karnataka Value Added Tax Act, 2003. onwards --------------------------------------------------------------------------- (iii) Walkie Chappals from 12.5% under Section 4(1)(b) of the 1.4.2005 onwards Karnataka Value Added Tax Act, 2003" ---------------------------------------------------------------------------

It is in these circumstances, this Appeal is filed by raising the above referred questions of law.

Sri R. V. Prasad, learned Counsel for the Appellant would argue that the Authority is wrong in classifying Walkie Chappal as not falling under the description of 'Plastic Footwear' for the period from 1.4.2005 to 6.6.2005. He would further say that