The central legal point established in the judgment is that for a product to be classified as plastic footwear under Entry C74, it must be made entirely of plastic, rejecting the test of predominance of plastic content.

This appeal by the Commissioner of Sales Tax has been admitted on the following substantial questions of law :

(i) Whether in the facts and in the circumstances of the case, the Tribunal was justified in construing the Schedule Entry C74 to mean footwear predominantly made of plastic and not as footwear exclusively/entirely made of plastic; and

(ii) Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the goods of the respondent namely “Escort 111 SYN Black” sold through invoice dated 2508/ 2005” though admittedly not wholly made of plastic would be covered by the Schedule Entry C74.

2. The Respondent engages in the business of the import and sale of footwear at Pune and is registered under the Maharashtra Value Added Tax Act, 2002. An application was submitted on 25 December 2007 to the Commissioner for a determination under Section 56 of the Act, accompanied by a Tax Invoice InvoiceNo.1130 dated 25 August 2005 for a product described as Escort 111 SYN Black. The contention of the Respondent was that the product manufactured by it is plastic moulded footwear and is covered by Entry C74 of the Schedule so as to attract a taxable rate of four per cent. Entry C74 at the material time was as follows :

“C74 Plastic Footwear 4% 1.4.2005 to 30.4.2005

C74 Plastic footwear 4% 1.5.2005 onwards (moulded);

hawaiichappals and straps thereof”

3. The Commissioner by his determination dated 11 February 2008 held that in order to fall for classification under Entry C74, a product must satisfy two criteria: (i) The product should be moulded; and (ii) The product should be made entirely of plastic. Upon examining the process of manufacture, the Commissioner came to the conclusion that the product in question is made by applying a Direct Injection Process and is hence, moulded footwear. The first criterion was held to be satisfied. On the second criterion, it is an admitted position that the shoe upper is made of plastic coated fabric while the sole is made of PVC (plastic). The contention of the Respondent was that the footwear is predominantly made of plastic and hence, should be classified as plastic footwear under Entry C74. The Respondent relied upon certificates of the Footwear Design and Development Institute of the Ministry of Commerce and Industries in the Government of India. The Commissioner considered the certificates which stated that in the sample, the visible portion is plastic; the upper material is plastic coated fabric, the sole is PVC (plastic) and hence, the footwear was sought to be classified as plastic footwear with a direct injected sole. The Commissioner was of the view that according to the certificate, the upper portion is plastic coated and is not itself plastic. A layer of cloth is coated with plastic, while the sole is the only part which is purely plastic as it is made from plastic granules. Hence, it was held that the product does not fall within the meaning of the expression “plastic footwear” as it is not purely a plastic product. The upper part is made out of hand cut and stitched plastic coated fabric and thus only the lower part is made out of moulded plastic. The Commissioner relied upon the judgment of the Karnataka High Court in Preston India Private Limited vs. State of Karnataka. (2007) 35 MTJ 139 Consequently, The Commissioner held that the product was not covered by Entry C74, but by residual Entry E1 and was hence liable to tax at 12.5%.

4. The decision of the Commissioner was challenged by the Respondent in appeal before the Tribunal. The Tribunal by its judgment dated 16 January 2010 held that the footwear was plastic footwear as it was predominantly made of plastic and was, therefore, covered by Entry C74. The Tribunal noted that “it is true that.. footwear is not made entirely of plastic because other materials like fabric are also used therein”. The Tribunal noted that “man made fabric with plastic coating is certainly used on the upper port