2000 (1) TMI 853 - SC - VAT and Sales Tax

Whether Diesel engine pump sets are not agricultural implements? Held that - Appeal dismissed. Subsequent to the amendment, the exemption was given to agricultural implements but implements that were operated by power were excepted therefrom. A clear inference, therefore, arises that tractors for the purposes of item No. 13 are agricultural implements that are operated by power. Now, tractors are not operated by electric power but by other motive power. The words operated by power , therefore, cannot be confined to implements operated by electric power but must include implements that are operated by motive power of any kind. The majority decision of the Tribunal was, therefore, justified.

Summary

Issues:
1. Interpretation of the exemption under item 13 of the Bengal Finance (Sales Tax) Act, 1941 regarding diesel engine pump sets as agricultural implements.
2. Determination of whether diesel engine pump sets are exempt from taxation based on the definition of "operated by power" in the context of agricultural implements.
3. Assessment of the impact of the retrospective amendment and validation in 1993 on the appellant and similar parties.

Issue 1 - Interpretation of Exemption under Item 13:
The appellant contended that diesel engine pump sets should be exempt from sales tax as agricultural implements under item 13 of the Act. Initially, there was a dispute regarding whether these pump sets qualified as agricultural implements. The Bengal Taxation Tribunal concluded that the pump sets were agricultural implements, leading to an amendment that clarified the exemption. The amendment broadened the scope of exemption to include all agricultural implements except those operated by power. The Tribunal's majority decision was based on the understanding that tractors, also considered agricultural implements, are operated by power, which includes any motive power, not just electric power.

Issue 2 - Definition of "Operated by Power" in Exemption Context:
The crux of the issue revolved around the interpretation of "operated by power" in the exemption clause. The appellant argued that since the pump sets were not operated by electric power, they should be exempt. However, the Tribunal's majority decision reasoned that "operated by power" encompassed all forms of motive power, not limited to electric power. This interpretation aligned with the broader understanding that tractors, as agricultural implements, are also operated by power, which includes various forms of motive power.

Issue 3 - Impact of Retrospective Amendment and Validation:
The appellant raised concerns about the retrospective amendment in 1993, which imposed a financial burden as they were now liable to pay sales tax they previously thought was exempt. The argument was that the swift introduction of the amendment after the Tribunal's decision disadvantaged the appellant and others in a similar position. However, the Court was not persuaded by this argument, noting that the amendment was enacted shortly after the Tribunal's decision, justifying its validity and applicability.

In conclusion, the Supreme Court dismissed the appeal, upholding the Tribunal's decision that diesel engine pump sets were not exempt from taxation under the revised interpretation of item 13. The Court affirmed that the term "operated by power" includes all forms of motive power, not solely electric power, thereby subjecting the pump sets to taxation.