Coins with Goddess Lakshmi Engraving Classified as Articles of Gold, Not Bullion
In a significant ruling, the Madras High Court has upheld the decision to impose a higher tax rate on gold coins engraved with the picture of Goddess Lakshmi, sold by M/s HDFC Bank Ltd. The court determined that these coins are articles of gold and not bullion, thereby attracting a 4% tax rate applicable to jewellery and gold articles rather than the 1% tax rate for bullion.
The case, titled "State of Tamil Nadu v. M/s. HDFC Bank Ltd.," was adjudicated by a bench comprising Dr. G. Jayachandran and N. Mala, JJ. The dispute centered around whether the engraved gold coins should be classified as bullion, which typically refers to uncoined gold or silver in raw or unwrought form, or as a finished product subject to a higher tax rate.
The controversy arose after the Sales Tax Appellate Tribunal (STAT) ruled that the sale of these coins should be taxed at the bullion rate of 1%. The State of Tamil Nadu, represented by Ms. Amirtha Poonkodi Dinakaran, challenged this decision, arguing that the coins were manufactured items with value addition due to the engraving, thus fitting the classification of gold articles.
The High Court referenced a Supreme Court judgment in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s.G.S.Pai & Co, which clarified that "bullion" is understood in common parlance as raw or unwrought gold or silver, not manufactured articles. According to the Supreme Court, engraved gold coins are finished products and therefore should not be classified as bullion.
This ruling overturns the Tribunal's decision and reinstates the Appellate Authority's assessment, which had applied the 4% tax rate. The court emphasized that the engraving of the coins adds value and transforms them into distinct commercial products, differentiating them from raw bullion.
Despite multiple adjournments to allow for representation from HDFC Bank Ltd., the respondent failed to appear, leading the court to proceed with the judgment. The decision marks a significant precedent in the interpretation of tax classification for manufactured gold articles, impacting future cases involving similar issues.
Bottom line:-
Taxation - Sale of gold coins engraved with the picture of Goddess Lakshmi - Held, such coins lose their character as bullion and cannot be taxed at the rate applicable to bullion. They are considered articles of gold and are taxable at the higher rate applicable to jewellery/articles of gold.
Statutory provision(s):
- Sales Tax Act provisions regarding tax rates for bullion versus articles of gold/jewellery
State of Tamil Nadu v. M/s. HDFC Bank Ltd., (Madras)(DB) : Law Finder Doc id # 2938138
