1998 (12) TMI 581 - AT - VAT and Sales Tax

Issues Involved:
1. Legality of tax levy on the sale of wet grinders.
2. Determination of whether the sale of wet grinders constitutes a second sale or a first sale.
3. Interpretation of relevant entries in the TNGST Act regarding wet grinders.
4. Examination of whether the combination of grinder body and motor results in a new commercial commodity.
5. Consideration of relevant case laws and precedents.

Issue-wise Detailed Analysis:

1. Legality of Tax Levy on the Sale of Wet Grinders:
The petitioners challenged the order of assessment and the proposed levy of tax on the sale of wet grinders, arguing that these sales were second sales and thus not liable for tax. They contended that the grinder body and motor had already suffered tax when purchased separately from registered dealers within the state. The Tribunal, however, upheld the Revenue's position that the combination of these components resulted in a new commercial commodity, making the sale taxable.

2. Determination of Whether the Sale of Wet Grinders Constitutes a Second Sale or a First Sale:
The petitioners argued that the wet grinders were second sales since the components had already been taxed. The Tribunal noted that prior to 1992-93, such sales were treated as second sales and exempt from tax. However, from 1994-95 onwards, the Revenue began treating these sales as first sales and levied taxes accordingly. The Tribunal concluded that the combination of the grinder body and motor created a new commercial commodity, thus constituting a first sale.

3. Interpretation of Relevant Entries in the TNGST Act Regarding Wet Grinders:
The Tribunal examined the relevant entries in the TNGST Act, including Entry 41-E, Entry 11 of Part D, and Entry 65 of Part D of the First Schedule. The Tribunal noted that the description of wet grinders under these entries included grinders with or without motors. The Tribunal found that the statutory language indicated that the combination of the grinder body and motor into a usable wet grinder constituted a new commercial commodity, subject to tax.

4. Examination of Whether the Combination of Grinder Body and Motor Results in a New Commercial Commodity:
The Tribunal considered the arguments and evidence presented by both sides, including photographs of the wet grinders before and after assembly. The Tribunal concluded that the combination of the grinder body and motor resulted in a new commercial commodity, the usable wet grinder, which had a distinct character and use from its original components. The Tribunal held that this new commodity was taxable under the provisions of the TNGST Act.

5. Consideration of Relevant Case Laws and Precedents:
The Tribunal reviewed several case laws cited by both parties. The petitioners relied on decisions such as State of Tamil Nadu v. Suguna Agencies, Kumaran Paper Products v. State of Tamil Nadu, and Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers, which supported their argument that the combination of components did not result in a new commercial commodity. However, the Tribunal also considered decisions such as Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise, Hyderabad, and S. Durai v. Joint Commissioner (SMR) of Commercial Taxes, Chepauk, Madras, which supported the Revenue's position that the combination of components created a new commercial commodity subject to tax. The Tribunal ultimately aligned with the latter decisions, affirming the tax levy on wet grinders.

Conclusion:
The Tribunal dismissed the petitions, holding that the combination of the grinder body and motor resulted in a new commercial commodity, the wet grinder, which was subject to tax as a first sale under the TNGST Act. The Tribunal found no grounds to deviate from the established legal principles and precedents supporting the Revenue's position. The petitions were dismissed without costs.

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