1972 (8) TMI 119 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of item 3 of Schedule I of the Sales Tax Act regarding taxation on bodies built on chassis supplied by customers.

Analysis:
The assessees, dealers in automobiles, claimed exemption on a turnover related to fixing bodies on chassis. The assessing officer disallowed the exemption, leading to appeals. The Appellate Assistant Commissioner allowed exemption on a portion of the turnover and sustained the levy at 7%. The assessees then appealed to the Sales Tax Appellate Tribunal, arguing that the disputed turnover represented a works contract, not a sale. They contended that even if considered a sale, it should be taxed at 2% multi-point, not 7% single point under item 3 of Schedule I. The Tribunal upheld the assessment at 7%, stating the bodies built on chassis fell under item 3. The assessees challenged this view, citing the Amending Act No. 7 of 1965, which specifically included bodies built on chassis in item 3. They argued that pre-amendment, such bodies were not intended to be taxed under item 3. The revenue asserted that the bodies fell under "articles adapted for use generally as parts and accessories of motor vehicles."

The High Court analyzed a similar entry under the Tamil Nadu General Sales Tax Act and noted that bodies built on chassis could not be considered component parts or accessories of motor vehicles. The revenue referenced a decision from the Allahabad High Court, which deemed bodies mounted on chassis as component parts. However, the High Court distinguished this decision, stating it did not apply to the current case. The Court examined the statement of objects and reasons of the Amending Act 7 of 1965, which indicated the Government's understanding that bodies built on chassis were not covered under item 3 pre-amendment. The Court emphasized the importance of administrative interpretations in guiding statutory provisions.

Ultimately, the High Court agreed with the view that bodies built on chassis supplied by customers were not subject to taxation under item 3 of Schedule I before the 1965 amendment. The tax case was allowed, with no order as to costs.