Pidilite's SBR Latex Products Covered By 'Rubber' Entry, Taxable At 5%: Uttarakhand High Court

Today, the Uttarakhand High Court held that Pidilite Industries' Dr. Fixit Pidicrete URP and Dr. Fixit Super Latex, being Styrene Butadiene Rubber (SBR) Latex, fall within the term “rubber” under the Uttarakhand Value Added Tax Act and are taxable at 5%, rather than the 13.5% rate applicable to unclassified goods.

A Division Bench of Chief Justice Manoj Kumar Gupta and Justice Subhash Upadhyay set aside a Commercial Tax Tribunal's judgment and restored the First Appellate Authority's order classifying the products under Entry 96 of Schedule II-B of the Uttarakhand VAT Act. It observed:

“Once the goods are admittedly Styrene Butadiene Rubber, the fact that such rubber is in latex form does not deprive it of its essential character as rubber. Its physical form cannot, by itself, be employed to deny it a specification, to which it otherwise answers by its nature and composition.”

The dispute concerned the classification of Pidilite Industries' Dr. Fixit Pidicrete URP and Dr. Fixit Super Latex. The products were admittedly SBR Latex, a form of synthetic rubber.

Entry 96 of Schedule II-B of the Uttarakhand VAT Act uses the term “rubber” without restricting it to natural rubber. The Commercial Tax Tribunal had held that “latex” under Entry 96 referred only to natural latex obtained from a rubber plant. It consequently classified Pidilite's products as unclassified goods taxable at 13.5%.

The High Court found that the Tribunal had approached the issue too narrowly by focusing on whether “latex” included synthetic latex. It held that the Tribunal should first have considered whether SBR, which itself stands for Styrene Butadiene Rubber, was covered by the word “rubber” in the same entry.

It further held that where goods reasonably fall within a specific tax entry, they should not ordinarily be classified under a general or residuary entry carrying a higher rate. The burden lies on the Revenue to establish that the goods cannot reasonably fall within the specific entry before they can be taxed under the residuary entry.

The Bench also rejected reliance on the products' use as waterproofing and bonding agents, holding that the end use of a product cannot determine its tax classification where its nature and character otherwise bring it within a specific entry.

Accordingly, the High Court held that SBR Latex is covered by Entry 96 and taxable at the applicable 5% rate.

Appearances: Senior Advocate Prakash Shah, assisted by Advocates Rohit Arora, Mohit Rawal and Yuvraj Singh, appeared for Pidilite Industries Limited. Puja Banga, Standing Counsel, appeared for the State of Uttarakhand