1995 (9) TMI 340 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether Luna mopeds and moped spares fall under the category "machinery" and thus, whether the penalty under section 10(b) of the CST Act is applicable.
2. Whether transformers fall under the category "machinery" and thus, whether the penalty under section 10(b) of the CST Act is applicable.
3. The validity of the penalty imposed by the assessing authority under section 10-A of the CST Act for the use of C forms for purchases not covered by the registration certificate.

Detailed Analysis:

Issue 1: Luna Mopeds and Moped Spares as "Machinery"
The assessee argued that Luna mopeds and moped spares should be classified under "machinery" as per the registration certificate. The Appellate Assistant Commissioner agreed, stating that these items fall under the broad classification of "machinery," thus negating any false representation by the assessee in using C forms for their purchase. The Tribunal upheld this view, dismissing the enhancement petitions filed by the State. The Tribunal cited various judicial decisions, including D.B. Bhandari v. State of Mysore and Corporation of Calcutta v. Cossipore Municipality, which broadly defined "machinery" to include mechanical contrivances generating power or modifying natural forces. The Tribunal concluded that "Luna mopeds" fit within this definition and thus, no false representation was made by the assessee. Consequently, the penalty under section 10(b) of the CST Act was not exigible.

Issue 2: Transformers as "Machinery"
The Tribunal initially ruled that transformers should be considered as "machinery," referencing the decision in Bhandari v. State of Mysore. However, the department contended that transformers are separately classified under the TNGST Act and do not fall within the registration certificate's scope. The Tribunal found no false representation by the assessee and set aside the penalty for transformers. However, the High Court noted that the assessee purchased transformers, fitted them in panels, and sold them as control boards. The Appellate Assistant Commissioner pointed out that even if transformers are considered machinery, the registration certificate authorized the purchase of "machinery" solely for resale, not for manufacturing and selling as control boards. Therefore, the High Court restored the penalty concerning transformers, as the assessee did not sell them as standalone items but as part of a different product.

Issue 3: Validity of Penalty under Section 10-A of the CST Act
The assessing authority initially imposed a penalty under section 10-A of the CST Act, holding that the use of C forms for purchasing items not covered by the registration certificate amounted to false representation under section 10(b). The Appellate Assistant Commissioner and the Tribunal partially overturned this, ruling that Luna mopeds and spares fall under "machinery," thus no false representation occurred. However, the penalty for transformers was reinstated by the High Court, as the assessee's resale of transformers as control boards violated the registration certificate's terms. The penalty for folding chairs and cables was confirmed by both the Appellate Assistant Commissioner and the Tribunal, as these items did not fall under the "machinery" classification.

Conclusion:
The High Court concluded that Luna mopeds and moped spares fall under the broad classification of "machinery," and thus, the penalty under section 10(b) of the CST Act is not applicable for these items. However, transformers, although potentially classified as machinery, were not sold as standalone items but as part of control boards, violating the registration certificate's terms. Therefore, the penalty for transformers was reinstated. The penalty for folding chairs and cables was upheld, as these items did not fall under the "machinery" classification. The appeals were partly allowed, restoring the penalty for transformers while dismissing the appeals concerning Luna mopeds and moped spares.