1991 (6) TMI 222 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Determination of the correct entry for sales tax purposes for Model 2030 chain sharpener under the Gujarat Sales Tax Act, 1969.
2. Applicability of previous judicial decisions on the classification of machinery used in manufacturing.
3. Interpretation of the phrase "machinery used in the manufacture of goods" in the context of the Gujarat Sales Tax Act.

Detailed Analysis

1. Determination of the correct entry for sales tax purposes for Model 2030 chain sharpener under the Gujarat Sales Tax Act, 1969.
The primary issue was whether Model 2030 chain sharpener should be classified under entry 13 of Schedule III (residuary entry) or entry 16(1) of Schedule II, Part A (machinery used in the manufacture of goods) of the Gujarat Sales Tax Act, 1969. The Deputy Commissioner of Sales Tax and the Tribunal both determined that the Model 2030 chain sharpener fell under entry 13 of Schedule III, not under entry 16(1) of Schedule II, Part A. The Tribunal concluded that the chain sharpener was a service machine used for sharpening teeth and not directly involved in the manufacturing process of goods, thus confirming the Deputy Commissioner's order.

2. Applicability of previous judicial decisions on the classification of machinery used in manufacturing.
The dealer argued that the Tribunal failed to correctly follow principles laid down by the High Court in cases like Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat and State of Gujarat v. Gujarat Engineering Company. In Industrial Machinery Manufacturers, humidifiers used in cotton textile mills were classified as machinery used in manufacturing because they were essential to the process. However, the court found that this principle did not apply to the chain sharpener, as it was not directly used in the manufacturing process but was merely a service tool. The Tribunal also distinguished the Supreme Court decisions in Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar and J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, noting that these cases dealt with different contexts and facts.

3. Interpretation of the phrase "machinery used in the manufacture of goods" in the context of the Gujarat Sales Tax Act.
The court emphasized that the phrase "machinery used in the manufacture of goods" should be interpreted in its popular sense, as understood in common parlance, rather than in a technical sense. The Tribunal found that the Model 2030 chain sharpener was meant for sharpening chain saws and was not essential to the manufacturing process of cutting or sawing wood. The court reiterated that the machinery must play an integral role in the manufacturing process to fall under entry 16(1) of Schedule II, Part A. The Tribunal's finding that the chain sharpener was a service machine and not a manufacturing machine was upheld.

Conclusion
The court answered the reference in the affirmative, favoring the Revenue and against the assessee. The Model 2030 chain sharpener was correctly classified under entry 13 of Schedule III, not under entry 16(1) of Schedule II, Part A, of the Gujarat Sales Tax Act, 1969. The Tribunal's findings and application of legal principles were upheld, and no error was found in its conclusion. The reference was answered accordingly, with no order as to costs.