1973 (10) TMI 48 - HC - VAT and Sales Tax

Summary

Issues:
Assessment under Mysore Sales Tax Act, 1957 - Claim of concessional tax rate under section 5(3A) - Interpretation of "component part" - Entitlement to benefit of section 5(3A) for sales of goods mentioned in Second Schedule.

Analysis:
The judgment by the High Court of Mysore pertains to revision petitions filed by an assessee under section 23(1) of the Mysore Sales Tax Act, 1957, concerning assessment years 1967-68 and 1968-69. The assessee, a manufacturer of "felt washers" sold to M/s. Motor Industries Co. for manufacturing "micro filters," claimed a concessional tax rate under section 5(3A) before the assessing authority, which was initially accepted but later revised by the Deputy Commissioner of Commercial Taxes. The key issue was whether the assessee was entitled to the benefit of section 5(3A) of the Act, which provides a lower tax rate for sales of goods mentioned in the Second Schedule to registered dealers for use as component parts in manufacturing other goods. The court examined the conditions required for availing the concessional rate under section 5(3A) and the definition of "component part" as per the Act.

The court highlighted that for a dealer to qualify for the concessional rate under section 5(3A), two conditions must be met: the goods sold must be listed in the Second Schedule, and the sale must be to a manufacturer who also produces goods from the said schedule. The definition of "component part" was crucial, referring to an article forming an identifiable constituent of the finished product. In this case, the Motor Industries Company, purchasing "felt washers," manufactured "micro filters" that were component parts of motor vehicles listed in the Second Schedule. However, the "felt washers" were not component parts of motor vehicles and did not fall under any item in the Second Schedule, as they could not be identified as parts of a motor vehicle at that stage of manufacture.

The court referred to a previous decision to reject the argument that "felt washers" could be categorized under a different item in the Second Schedule. It emphasized that the Act did not intend to grant the benefit of section 5(3A) to a dealer selling a component part of a component part of a finished product. Drawing parallels with other items in the Second Schedule, the court concluded that the assessee's articles did not meet the conditions for concessional rate eligibility. Therefore, the Tribunal's decision to deny the benefit of section 5(3A) was upheld, leading to the dismissal of the revision petitions without costs.

In conclusion, the judgment clarifies the interpretation of "component part" under the Mysore Sales Tax Act, emphasizing the specific conditions for availing the concessional tax rate under section 5(3A. The court's analysis of the Second Schedule items and the purpose of the provision sheds light on the legislative intent to promote ancillary industries and regulate tax benefits for component part manufacturers, ultimately guiding the decision to dismiss the revision petitions.