1991 (2) TMI 391 - HC - VAT and Sales Tax

Summary

Issues:
Taxability of pipes, pumps, engines, motor, etc., sold as part of a sprinkler system under entry 20 of the Second Schedule to the Karnataka Sales Tax Act, 1957.

Analysis:
The judgment of the court addressed the taxability of various articles like pipes, pumps, engines, and motors, sold as part of a sprinkler system under entry 20 of the Karnataka Sales Tax Act, 1957. The Commissioner of Commercial Taxes issued a clarification that these articles are to be taxed under the said entry, considering them as accessories to the sprinkler system. The petitioners argued that these articles have independent use and are not exclusively meant for the sprinkler system, thus should not be taxed under entry 20. The court delved into the definition of "accessories" and concluded that articles sold as adjuncts to the sprinkler system, aiding in its functioning, can be considered as accessories. However, items like pipes and pumps, which have independent utility and are not exclusively manufactured for use in sprinklers, should not be taxed under entry 20.

The court emphasized that the term "accessories" should be interpreted in the context of the specific machinery or system they are associated with. It distinguished between items that are essential for the functioning of the main machinery, like the sprinkler, and those that are merely additional for elegance or comfort. The judgment highlighted that the assessing authority should determine whether an article is truly an accessory to a specific system, such as a sprinkler, rather than relying on a broad concept like a "sprinkler system" to levy taxes.

Furthermore, the court referred to a Supreme Court decision regarding car seat covers to establish the criteria for determining whether an article qualifies as an accessory. The test included assessing whether the article is an adjunct or an accompaniment for the convenient use of the main machinery, adds to its beauty or comfort, or serves a supplementary role. The judgment emphasized that the correct test for determining an accessory is not solely based on the necessity for the effective use of the main machinery but also considers factors like general adaptability and commercial availability in relevant markets.

In conclusion, the court allowed the writ petitions, setting aside the Commissioner's circular and directing the assessing authority to reevaluate the taxability of the articles in question based on the clarified interpretation of "accessories" in relation to a sprinkler. The court emphasized the need for a fresh examination of each article to determine its status as an accessory, ensuring compliance with the law and the observations made in the judgment.