1981 (12) TMI 144 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the term "machinery" under rule 42-A of the Gujarat Sales Tax Rules, 1970 for set-off eligibility.

Detailed Analysis:

The case involved a dispute regarding the classification of certain articles purchased by an assessee, engaged in the manufacturing of chemicals, as "machinery" under rule 42-A of the Gujarat Sales Tax Rules, 1970. The assessee claimed a set-off on the tax paid for these articles, arguing that they were integral parts of machinery used in the manufacturing process. The Sales Tax Officer and the Assistant Commissioner rejected the claim, stating that the articles were not machinery but parts of machinery, hence not eligible for a set-off. The Tribunal, however, ruled in favor of the assessee, considering the special concession for "new industry" and the essential role played by the disputed articles in the manufacturing process.

The Tribunal described the functions of the disputed articles in the manufacturing process, emphasizing their role in various chemical processes and the interdependence of these articles in the overall functioning of the plant. While the State contended that a complete machine is necessary to qualify as machinery under rule 42-A, the Tribunal held that the articles, though not standalone machines, were integral parts of a processing unit, contributing to the production process. The Tribunal's decision was based on the understanding that machinery includes component parts of a complex machine, as per English usage and judicial precedents.

The judgment referred to the decision in Corporation of Calcutta v. Cossipore Municipality, where the term "machinery" was discussed in the context of its ordinary sense, emphasizing the generation or application of power or natural forces to achieve specific results. Subsequent cases, such as Ambica Wood Works v. State of Gujarat and State of Gujarat v. Sukan Industries, further clarified that machinery must involve the interaction of objects or parts to produce a specific outcome, either through mechanical or manual force application. These cases highlighted the importance of a complete and integrated collection of objects that work together to achieve a specific activity or result.

The Court concluded that the disputed articles, being integral parts of a processing unit essential for the manufacturing process, qualified as machinery under rule 42-A. Citing the dictionary definition and previous judicial interpretations, the Court affirmed the Tribunal's decision, ruling in favor of the assessee and rejecting the revenue's argument against the eligibility of the set-off. The judgment highlighted that for an article to be considered machinery, it must either be a complete machine or part of a machine that contributes to a specific result through interdependent operation with other parts.

In light of the detailed analysis and precedent references, the Court answered the question referred to it in the affirmative, supporting the assessee's claim for set-off eligibility. The judgment concluded without awarding costs to either party, affirming the Tribunal's decision in favor of the assessee.