1999 (10) TMI 704 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of brake shoes under the Goa Sales Tax Act, 1964.
2. Determination of whether brake shoes are "spare parts" under entry 1 of the Twelfth Schedule or fall under the residuary clause (xxviii) of section 7(1) of the said Act.
3. Burden of proof in tax classification.
4. Interpretation of the term "spare part" in common parlance and legal precedents.

Issue-wise Detailed Analysis:

1. Classification of Brake Shoes:
The petitioner sought classification of brake shoes and other processed components under Schedule Twenty-eight to the Goa Sales Tax Act, 1964, contending that these products were not covered under Schedules One to Twenty-seven. The Commissioner of Sales Tax classified brake shoes under entry 1 of the Twelfth Schedule, making them taxable at 5% at the first point of sale.

2. Determination of Whether Brake Shoes are "Spare Parts":
The core issue was whether brake shoes are "spare parts" under entry 1 of the Twelfth Schedule or fall under the residuary clause (xxviii) of section 7(1). The petitioner's argument was that brake shoes are integral to the vehicle's wheels, do not require frequent replacement, and are not kept as spares for emergencies. The respondents argued that the dominant test is the replaceability of the part, not the frequency of replacement. The court examined various legal precedents and dictionary definitions to determine the meaning of "spare part."

3. Burden of Proof in Tax Classification:
The respondents argued that the burden of proof lies on the dealer to prove non-liability for tax under section 9 of the said Act. The petitioner countered that the burden is on the taxing authority, citing several Supreme Court and High Court judgments. The court noted that the petitioner's contentions regarding the nature and use of brake shoes were not refuted by the sales tax department.

4. Interpretation of the Term "Spare Part":
The court referred to the plain dictionary meanings and legal precedents to interpret "spare part." The Shorter Oxford English Dictionary defines "spare" as something kept in reserve for future use, while Webster's International Dictionary defines "spare part" as an extra part kept for emergency or replacement. The court considered rulings from various High Courts, which emphasized that "spare parts" are those parts that are severable, replaceable, and kept in reserve for emergencies or due to wear and tear.

Conclusion:
The court concluded that brake shoes manufactured by the petitioner do not qualify as "spare parts" under entry 1 of the Twelfth Schedule. They neither require replacement in the ordinary course due to wear and tear, nor are they kept in reserve for emergencies or available in shops. Therefore, brake shoes fall under the residuary clause (xxviii) of section 7(1) of the Goa Sales Tax Act, 1964. The impugned order by the Commissioner of Sales Tax was quashed, and the writ petition was allowed, with the final assessment subject to the result of the petition. The court ruled in favor of the petitioner, making the rule absolute in terms of prayer clause (B) and leaving the parties to bear their own costs.