1992 (4) TMI 217 - HC - VAT and Sales Tax

Issues Involved:
1. Whether television sets were covered by entry No. 4 of the First Schedule appended to the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi.
2. Whether T.V. cabinets, decorative panels, turn knobs, printed circuit boards, and boards were component parts and accessories of "wireless reception instruments and apparatus" within the meaning of entry No. 4 of the First Schedule appended to the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi.

Issue-wise Detailed Analysis:

Issue 1: Coverage of Television Sets under Entry No. 4
The primary dispute revolves around the rate of sales tax applicable to television sets. The assessee argued that television sets do not fall under any entries of the First Schedule to the Act, thus should be taxed at a lower rate of 5% under section 5(1)(c). The department, however, applied a 10% rate, arguing that television sets fall under "wireless reception instruments and apparatus."

The court examined the relevant entries in the First Schedule over different periods, noting that the term "wireless reception instruments and apparatus" was consistently used. The court rejected the assessee's reliance on the trade parlance test, which was supported by the Andhra Pradesh High Court's judgment in State of A.P. v. V.V. Rama Rao and Company [1989] 74 STC 190. Instead, it emphasized the scientific and technical meanings of terms, citing judgments from the Chancery Court and the Supreme Court.

The court concluded that television sets, which operate on the principle of wireless reception, fall under the term "wireless reception instruments and apparatus." The inclusion of specific items like radios and radio-gramophones in the entry was deemed illustrative, not exhaustive. The court cited various dictionary definitions and legal precedents to support its interpretation. It held that a television set, which receives sound and images via radio waves, is indeed a "wireless reception instrument and apparatus."

Therefore, the court answered question No. 1 in favor of the department, affirming that television sets are covered by entry No. 4 and subject to a 10% sales tax rate.

Issue 2: Classification of T.V. Cabinets, Decorative Panels, Turn Knobs, Printed Circuit Boards, and Boards
The second issue required the court to determine whether these items were "spare parts" and accessories of "wireless reception instruments and apparatus" under entry No. 4. The court noted that the correct term in the entry was "spare parts," not "component parts."

The court distinguished between "spare parts" and "component parts," referencing judgments from the Bombay High Court and the Madras High Court. It concluded that while "spare parts" are always "component parts," the reverse is not true. "Spare parts" are items kept for replacement due to wear and tear or emergencies.

Applying this distinction, the court held that television cabinets and printed circuit boards are "component parts" but not "spare parts." Therefore, these items do not fall under entry No. 4 and are subject to a 5% sales tax rate under section 5(1)(c).

However, decorative panels and turn knobs were classified differently. Decorative panels, not essential for the functioning of a television set, were deemed "accessories" and thus covered by entry No. 4. Turn knobs, used for replacement and fitting the description of "spare parts," were also included under entry No. 4.

Thus, question No. 2 was answered partly in favor of the Revenue and partly in favor of the assessee. Television cabinets and printed circuit boards were not covered by entry No. 4, while decorative panels and turn knobs were.

Conclusion:
The court concluded that television sets are covered by entry No. 4 and subject to a 10% sales tax rate. Television cabinets and printed circuit boards are "component parts" and subject to a 5% sales tax rate. Decorative panels and turn knobs are "accessories" and "spare parts," respectively, and subject to a 10% sales tax rate under entry No. 4. The reference was answered accordingly, with no order as to costs.

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