I am a small trader selling kirana goods and food items in punjab. I sell one food product which was being cleared @5% for last many years. This year the VAT department has issued notice to recover all the tax for previous years claiming that the item must be sold @16%. I was clearing the item under " puffed rice". The department in reply notice wanted to establish " trade name" or " general name" and explained that puffed rice is " phullia" and not the item being sold by me. On further analysis, it was established that " phullia" is known as " murmura/ rice layee" in hindi ( also mentioned in wikipedia). Now, "murmura/ rice layee" is covered as tax free in schedule A. This makes a case of declaring the same item under multiple tariff headings. I would like to know if this is reasonable defence to sustain the case. If not, are there any other options?
While classifying goods under VAT system, H S N code used to the said item in the schedules attached to your State VAT Act whether there is any specific entry with 8 or 6 or 4 digit codes, it shall be classified accordingly and also refer Customs Tariff Act. It is the bounden duty of the assessing authority to prove the rate of tax applicable on such goods in the case of a dispute.