The central legal point established in the judgment is the classification and taxation of products under the KVAT Act, S.R.O. No. 82/2006, based on the interpretation of the HSN Codes and the definition of 'manufacture'. The judgment also emphasizes the requirement for wilful suppression of turnover to justify the imposition of penalties.

Antony Dominic - These revision petitions have been filed by the State of Kerala aggrieved by the orders passed by the Kerala Value Added Tax Appellate Tribunal in its order in T.A. (VAT) Nos. 272/2008 and 314/2008.

The facts which led to the filing of these revision petitions are that the respondent herein, M/s. Jyothy Laboratories Ltd., a manufacturer and dealer of detergents, whiteners, etc., are also manufacturing and dealing in products known as "Ujala Supreme" and "Ujala Stiff and Shine". In respect of Ujala Supreme, in the returns filed for the year 2005-06, the assessee collected and paid tax on the sales turnover for the month April and May 2005 at 12.5 per cent and for the subsequent period at four per cent only. In so far as Ujala Stiff and Shine is concerned, the product was launched in June 2005 and four per cent tax was collected and paid.

The assessing officer issued annexure A notice under section 22(3) of the KVAT Act, on the basis that the aforesaid products of the assessee were laundry brighteners and proposing to classify the products under entry 27 of S.R.O. No. 82/2006 tax and levy tax at 12.5 per cent. On receipt of the notice, the assessee filed its objections contending that Ujala Supreme is the brand name under which it is marketing "acid violet" a Synthetic Organic dye, classified under HSN Code 3204.12.94, and that the same was used as a fabric whitener. Similarly, with respect to Ujala Stiff and Shine also, it was contended to be a brand name, under which vinyl acetate diluted in water which is used as a fabric stiffener and classified under HSN Code 3905, was marketed. According to the respondent, applying the Rules of Interpretation of Schedules to the Act, the products are liable to be assessed only at four per cent, these being covered by entry Nos. 155(8)(d) and 118(5) of the List A to the Third Schedule.

The assessing officer rejected the contentions of the assessee and issued annexure B proceedings holding that Ujala Supreme is liable to be classified as a laundry brightener under entry 27 of S.R.O. No. 82/2006. It was also held that Ujala Stiff and Shine is to be included under the residual entry No. 103 of S.R.O. No. 82/2006. On this reasoning, the assessing officer held that the products are liable for tax at 12.5 per cent and completed the assessment for the year 2005-06 to the best of his judgment, levying interest under section 31 and double the amount as penalty under section 22 of the KVAT Act. First appeal filed by the assessee was disposed of by annexure C order, confirming the classification of the products as held by the assessing officer. However, the appellate authority held that there was no finding that there was any wilful suppression of turnover, and in the absence of mens rea, the penalty levied was unjustified and ordered deletion of the penalty levied. Against the first appellate order, the assessee filed STA 272/2008 and to the extent penalty was deleted by the first appellate authority, the State also filed STA 314/2008 before the Appellate Tribunal.

Both the appeals were disposed of by the Appellate Tribunal by annexure D common order. In so far as Appeal No. 272/2008 filed by the assessee is concerned, the Tribunal by majority held, that the products are liable to be classified under the headings related to acid violet dye and polymer of vinyl acetate included in List to the Third Schedule and assessable to tax at four per cent. In so far as Appeal No. 314/2008 filed by the State is concerned, the appeal was dismissed.

Aggrieved by the aforesaid common order passed by the Tribunal, the State of Kerala has filed these revision petitions and the questions of law framed are the following :

O.T. Rev. No. 13/2009 (against TA (VAT No. 272/2008))

"(A) Ought not the Tribunal have held that Ujala Supreme and Ujala Stiff and Shine, manufactured by the assessee, cannot be levied tax as a industrial input under List A of the KVAT Act since the same is a finished product an