By TIOL News Service

AHMEDABAD, MAY 17, 2018: THE ISSUE IS - Whether paver blocks and curb stones can be classified as 'Bricks' under entry 10(1) of Schedule II to the Gujarat VAT Act. YES IS THE ANSWER.

The assessee company, engaged in interlocking paving blocks and curb stones, had returned income for the relevant AY. During the assessment proceeding, the assessee was of the opinion that such interlocking paving blocks and curb stones were bricks and the same was covered in entry 10(1) of Schedule II. However, to avoid future controversy, the assessee applied for determination of this issue u/s 80 before the competent authority. The assessee had also raised an issue regarding composition of tax before the Determining Authority. In respect with the issue of classification of paving blocks, the authority by an order dated March, 2009 held that the said product was not brick and hence, was taxable under the residuary entry at a higher rate. Simultaneously, towards the issue regarding composition of tax, the assessee had submitted that it was granted with a contract for construction whereby, the paver blocks were utilised. The Determining Authority decided that the goods used by the assessee in execution of such contract were not having tax and hence, the benefit of composition of tax would not be available to the assessee.

Aggrieved assessee, approached the Tribunal wherein, it was held that the paver blocks and curb stones were bricks and were also covered under entry 10(1) of the Schedule II. In the context of composition of tax, the Tribunal held that the requirement was that the goods used in execution of works contract should borne tax and not the transfer of property. When the uses in the taxable goods in execution of works contract, it could not be said that the assessee failed to comply with the provisions of Rule 28(8).

High Court held that,

++ in respect to the issue of correct classification of the goods in question viz. interlocking paving blocks and curb stones, we noted that entry 10(1) of the schedule-II to the VAT Act includes bricks of all kinds including fly ash bricks, refractory bricks, eco bricks and hollow block bricks. In plain terms, the intention of the legislature is thus to include all kinds of bricks within the fold of this entry. The entry is consciously and advisably worded widely. The bricks as understood in common usage and parlance need not require any description. Use of the paver blocks also in the recent times has become quite common. From the literature provided by the Counsel for both the assessee and Revenue, we gather that such interlocking paver blocks are made of concrete. They are used for making footpaths, used in gardens, passenger waiting areas, bus stops and such other public places. These are prefabricated systematic blocks of definite sizes and shapes mostly come with self interlocking patterns. By combining these blocks in desired numbers, a footpath, a portion of ground, a waiting area or such like can be paved with minimum effort and with greater durability. When used in different shapes or colours one can also create design or patterns on the floors so paved. Besides being easy to install, they are also easy to remove in case there is a possibility of frequent installation and relaying of underground ducts, pipelines or wires or the likes;

++ in case of Advance Bricks Company, the Supreme Court referred to various sources to better understand the term 'brick' which was not defined under the relevant statute i.e. Haryana General Sales Tax Act and observed that "... The term 'brick' has not been defined in the Act. The High Court has adopted the definition given in the order, where it has been defined as 'piece of burnt clay having geometrical shape fixed in a kiln'. In the absence of a statutory definition of the term 'brick', the common parlance meaning of the word as found in dictionaries has to be accepted ... According to the oxford English Dictionary 'brick' means 'a substance formed of clay, kneaded, moulded, and hardened by baking with fire, or in warm countries and ancient times by drying in the sun'. Encyclopaedia Britannica indicates that 'after the bricks are formed, they must be dried to remove as much free water as possible. Drying, apart from sundrying, is done in drier kiln with controlled, draft and humidity' ..." ;

++ from such materials, it could be seen that the paver blocks are also sometimes referred to as paver bricks. These paver bricks are superior to the conventional bricks in number of ways including the durability, the ease of laying and removing. In other words, these paver blocks fulfill the same purpose as the conventional bricks would do insofar as levelling and paving of ground surface is concerned. These uses of paver blocks and the conventional bricks overlap and are in fact interchangeable. It is however true that these paver blocks are not known to be used for the construction of walls and buildings which use the conventional bricks and other eco friendly and hollow bricks could be used for;

++ in case of Maruti Yeast India Pvt. Ltd., the Apex Court held that "... if there is a conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred ..." Further, in case of Porritts & Spencer (Asia) Ltd., it was observed that it is well settled that "... in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in their common parlance ..." From the principles emerging from the said judgments, we would have to give the widest amplitude to the entry in question. Only if we find that the entry does not through such interpretation also include the product in question can be fall back on the residuary entry. In the process, we would apply the common parlance test;

++ applying all the principles and on the basis of the usage and the purpose of manufacturing both the products, as also looking to the language used in the entry, we hold that the Tribunal was correct in coming to the conclusion that paver blocks and curb stones are classifiable within entry 10(1) of Schedule II to the VAT Act. We are conscious that Division Bench of Karnataka High Court in case of H. H. Cement Products has taken a contrary view. However, despite the view of the Karnataka HC, if the assessee or other similarly situated dealers, could produce the materials before the Statutory authority to canvass that the paver blocks are nothing but the bricks, the authority could take an independent view. Hence, this question is also answered against the Revenue.

(See 2018-TIOL-925-HC-AHM-VAT)