1996 (10) TMI 447 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether plant and machinery are incidental goods under section 2(bb) of the Entry Tax Act and liable to entry tax under section 3(1)(b) of the Entry Tax Act.
2. Whether laboratory equipment, water treatment plant, and waste water pollution equipment are incidental goods under section 2(bb) of the Entry Tax Act and liable to entry tax.

Issue-wise Detailed Analysis:

Issue 1: Plant and Machinery as Incidental Goods
Factual Matrix:
The non-applicant/assessee, a manufacturer of oil and oil-cake, was assessed to entry tax on plant and machinery purchases worth Rs. 10,26,230 by the Regional Assistant Commissioner of Sales Tax, Ujjain. The Tribunal held that plant and machinery are fixed assets and not incidental goods, thus not liable to entry tax. The applicant/revenue sought reference on this issue.

Tribunal's Findings:
The Tribunal concluded that plant and machinery are essential for the commencement of manufacturing business and cannot be categorized as incidental goods. It stated, "Inclusion of plant and machinery within the meaning of incidental goods would, therefore, be something like a child without parents, the condition of which cannot exist in practical life."

Court's Analysis:
The Court emphasized the distinction between goods used "in" manufacturing (incidental goods) and goods used "for" manufacturing (main goods). It noted that plant and machinery are essential for manufacturing and are not incidental. The Court stated, "Plant and machinery are the goods employed for manufacture of the commodity and not used in the manufacture of the commodity."

Conclusion:
The Court affirmed the Tribunal's decision, holding that plant and machinery are not incidental goods and thus not liable to entry tax under section 3(1)(b) of the Entry Tax Act.

Issue 2: Laboratory Equipment, Water Treatment Plant, and Waste Water Pollution Equipment as Incidental Goods
Factual Matrix:
The non-applicant/assessee, a manufacturer of starch, liquid glucose, and maize oil, was assessed to entry tax on laboratory equipment, water treatment plant, and waste water pollution equipment worth Rs. 7,52,667. The Tribunal held these items are plant and machinery, not incidental goods, and thus not liable to entry tax. The applicant/revenue sought reference on this issue.

Tribunal's Findings:
The Tribunal held that these items, categorized as plant and machinery, are not incidental goods. It stated, "All other goods which are neither raw material nor packing material nor plant and machinery but which are necessary for running the business of manufacture will be covered by the definition by 'incidental goods'."

Court's Analysis:
The Court reiterated its interpretation of section 2(bb) of the Act, emphasizing the use of the word "in" rather than "for" in the definition of incidental goods. It stated, "Goods used for such activities are immune from imposition of tax whereas goods used in such activities are exigible as incidental goods." The Court found that laboratory equipment, water treatment plant, and waste water pollution equipment are main goods for manufacturing and not incidental.

Conclusion:
The Court affirmed the Tribunal's decision, holding that laboratory equipment, water treatment plant, and waste water pollution equipment are not incidental goods and thus not liable to entry tax under section 3(1)(b) of the Entry Tax Act.

Final Judgment:
The Court answered the questions in both cases in the affirmative, in favor of the non-applicant/assessee and against the applicant/revenue. The Miscellaneous Civil Cases were disposed of accordingly, with no orders as to costs. The record of the Tribunal was ordered to be returned immediately.