1997 (9) TMI 579 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of super enamelled copper winding wire (S.E.C.W.) under the M.P. General Sales Tax Act, 1958 and M.P. Vanijyik Kar Adhiniyam, 1994.
2. Determination of the applicable rate of commercial tax on S.E.C.W.
3. Interpretation of relevant statutory entries and notifications.

Detailed Analysis:

1. Classification of Super Enamelled Copper Winding Wire (S.E.C.W.)

The petitioner, a public limited company, challenged the order dated October 20, 1995, by the Commissioner of Commercial Tax, Indore, which classified S.E.C.W. as "electrical goods" and subjected it to a 10% commercial tax rate. The petitioner argued that under a notification dated March 31, 1992, the rate of sales tax on S.E.C.W. was fixed at 6% from April 1, 1992, to March 31, 1995. With the introduction of the M.P. Vanijyik Kar Adhiniyam, 1994, effective April 1, 1995, the petitioner contended that the rate of tax on enamelled wire had not been specifically declared, warranting a determination under section 68 of the Act of 1994.

2. Determination of the Applicable Rate of Commercial Tax

The respondent determined that S.E.C.W. falls under Schedule II, Part IV, entry 18, categorizing it as an electrical commodity subject to a 10% tax rate. The petitioner argued that S.E.C.W. should be considered a spare part of machinery and machines worked by electricity, diesel, or petrol, thereby attracting a reduced tax rate of 4% under a state notification dated April 1, 1995.

3. Interpretation of Relevant Statutory Entries and Notifications

The court examined various judgments to interpret the classification and tax rate applicable to S.E.C.W.

- In State of Andhra Pradesh v. Radiant Engineering Co., the A.P. High Court held that insulated copper wire falls within the meaning of electrical goods, whereas bare wire does not, and is taxable as general goods.
- In Commissioner, Sales Tax v. Kohinoor India Pvt. Ltd., the Allahabad High Court discussed whether certain automobile parts were spare parts and their applicable tax rates.
- The Supreme Court in Atul Glass Industries (P.) Ltd. v. Collector of Central Excise emphasized the identification of a product by its functional character in common parlance.
- In Annapurna Carbon Industries Co. v. State of Andhra Pradesh, the Supreme Court highlighted that the primary or ordinary use of an article determines its classification.

The court concluded that S.E.C.W. is used for winding purposes in motors, armatures, chokes, and other electrical goods, making it an essential part of machinery. It cannot be used as an ordinary electrical wire, and its primary function aligns with being a spare part for machinery.

Conclusion:

The court held that S.E.C.W. should be classified as a spare part of machinery and machines worked by electricity, diesel, or petrol, under the notification dated April 1, 1995. Consequently, it should be taxed at a reduced rate of 4%. The impugned order was quashed, and the petition was allowed, with parties bearing their own costs. Security deposit, if any, was ordered to be refunded to the petitioner after due verification.

Judgment:

The petition succeeds, and the impugned order is quashed. S.E.C.W. is to be taxed at 4% under serial No. 10 of the Schedule of the notification issued by the State Government on April 1, 1995. Petition allowed.