1973 (7) TMI 106 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transactions involving the supply of batteries amount to the sale of batteries attracting sales tax liability.
2. What is the applicable rate of tax on the transactions if they are considered taxable sales?

Analysis:

Issue 1:
The petitioners contended that they reconditioned batteries by replacing worn-out parts and supplying them to customers, arguing it constituted a works contract and was not subject to sales tax. However, the assessing authority found no evidence that customers provided worn-out batteries for reconditioning. The authority determined that the petitioners likely purchased old batteries, rebuilt them, and sold them as finished products, thus subjecting the transactions to sales tax. The Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal upheld this view, concluding that the petitioners did not recondition batteries supplied by customers but sold rebuilt batteries as finished products. The court concurred with the lower authorities' findings, stating that without proof of customers supplying old batteries, the transactions constituted sales of goods, not works contracts. Therefore, the Tribunal's decision to tax the sales was deemed correct.

Issue 2:
Regarding the tax rate applicable to battery sales, the petitioners argued that batteries should be classified under "electrical goods" rather than under the category of motor vehicles and their accessories for tax purposes. The authorities considered batteries falling under item 3 of Schedule I, which deals with motor vehicles and their accessories. The court rejected the petitioners' argument that batteries did not need adaptation for use in motor vehicles and should not be classified under item 3. Since batteries were specifically mentioned in item 3, they were deemed to be part of motor vehicles and their accessories for taxation purposes. The court dismissed the petitioners' contention that batteries should be classified under item 41 for electrical goods, stating that item 41 did not include batteries. Consequently, the court upheld the taxation of batteries under item 3 of Schedule I.

In conclusion, the court dismissed the tax cases, affirming the lower authorities' decisions to tax the sales of batteries and uphold the tax rate classification under item 3 of Schedule I.