2002 (1) TMI 1271 - HC - VAT and Sales Tax

Summary

Issues:
Rate of sales tax on the sale of "hand pump"

Analysis:
The petitioner, a partnership firm dealing with manufacturing and selling hand pumps, faced an assessment under the Orissa Sales Tax Act, 1947 for the year 1991-92. The assessing officer considered the "water lifting hand pump" as machinery falling under entry No. 70 of the taxable list, imposing tax at 16 per cent. Additionally, interest was charged, leading to an appeal by the petitioner. The Assistant Commissioner of Sales Tax upheld the machinery classification but set aside the interest. Subsequent appeals to the Orissa Sales Tax Tribunal resulted in dismissal of the petitioner's appeal and allowance of the department's appeal.

The core contention revolved around whether "hand pumps" should be categorized as "machineries" under entry 70, attracting a 16 per cent tax rate. The petitioner argued for a lower tax rate based on rationality and cited a Supreme Court judgment emphasizing the need for a rational basis for differing tax rates within the same category of goods. The petitioner highlighted revisions in tax rates for hand pumps in 2000 as evidence that hand pumps should not be considered machineries.

The Court, in line with the petitioner's argument, found no justification for treating hand pumps as machineries and levying tax at 16 per cent. Drawing a parallel with pump sets run by diesel or electricity taxed at 8 per cent, the Court concluded that hand pumps should not be classified as machineries. Consequently, the impugned orders were quashed, and the matter was remitted to the Sales Tax Tribunal for further consideration within three months. The Tribunal was directed to verify if the Orissa Small Industries Corporation had already collected and deposited sales tax, relieving the petitioner from additional tax liability if confirmed.

In conclusion, the writ petition was allowed, with no costs incurred. Both judges, R.K. Patra and Ch. P.K. Misra, concurred on the decision, emphasizing the unsuitability of categorizing hand pumps as machineries for tax purposes.