1980 (1) TMI 175 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of monoblock centrifugal pumps as agricultural implements.
2. Tax exemption status of monoblock centrifugal pumps under the Punjab General Sales Tax Act, 1948.
3. Legality of the memorandum issued by the Excise and Taxation Commissioner, Punjab.
4. Authority of the Assessing Authorities to revise assessments based on the memorandum.

Detailed Analysis:

1. Classification of Monoblock Centrifugal Pumps as Agricultural Implements:
The primary issue in these cases was whether a monoblock centrifugal pump qualifies as an "agricultural implement" under clause 10 of item 34-D of Schedule B to the Punjab General Sales Tax Act, 1948. The court noted that before the amendment on April 15, 1971, item 34 simply listed "Agricultural implements." The amendment categorized agricultural implements into various sub-categories, including "Power implements," which specifically listed "centrifugal pump" under clause 10 of item 34-D. The court referenced the Karnal Machinery Store v. Assessing Authority, Karnal case, which held that monoblock pumping sets used for agricultural purposes were considered agricultural implements and thus exempt from sales tax.

2. Tax Exemption Status of Monoblock Centrifugal Pumps:
The court examined whether monoblock centrifugal pumps, which combine a centrifugal pump and an electric motor into a single unit, should be exempt from sales tax. The court found that monoblock centrifugal pumps are sold as one marketable commodity and are inseparable units. It was emphasized that the amended item 34-D includes "centrifugal pump" under power implements, and there was no indication that the State intended to treat different types of centrifugal pumps differently for tax purposes. Consequently, the court concluded that monoblock centrifugal pumps fall under the definition of "centrifugal pump" and are exempt from sales tax, irrespective of their use for agricultural or other purposes.

3. Legality of the Memorandum Issued by the Excise and Taxation Commissioner:
The memorandum dated April 9, 1979, issued by the Excise and Taxation Commissioner, Punjab, stated that monoblock pumping sets were not covered by item 34 and were thus taxable at 6%. The petitioners challenged this memorandum as illegal and without jurisdiction. The court observed that the State's written statement admitted that the memorandum did not carry legal force if it was not in accordance with law. Given the court's decision that monoblock centrifugal pumps are tax-free goods, the memorandum was deemed to have no legal force.

4. Authority of the Assessing Authorities to Revise Assessments Based on the Memorandum:
The court addressed the notices issued by the Assistant Excise and Taxation Commissioners for suo motu action under section 21(1) of the Act, based on the memorandum. The court quashed these notices as they related to revising assessments of monoblock pumping sets, affirming that such pumps are tax-free. However, the court clarified that the Assessing Authorities or the Assistant Excise and Taxation Commissioners could take suo motu action on other matters in accordance with the law.

Conclusion:
The court allowed all five writ petitions, quashed the memorandum dated April 9, 1979, and the related notices, and affirmed that monoblock centrifugal pumps are exempt from sales tax under the Punjab General Sales Tax Act, 1948. The petitioners were awarded costs, with counsel's fee set at Rs. 200 in each case.