2009 (6) TMI 951 - HC - VAT and Sales Tax

Summary

Issues involved: Challenge to Tribunal's order regarding taxation on sale of a lorry after building a body over a chassis.

Taxation on sale of lorry: The respondent purchased a chassis which had already suffered tax, built a body over it, and sold the complete unit as a lorry. The assessing authority determined tax on the sale of the lorry. The respondent contended that the chassis, having already been taxed, should not be taxed again after the body was built. The Tribunal accepted the respondent's case, prompting the State to appeal.

Legal precedent: The State relied on Division Bench decisions in South India Automotive Corporation Private Ltd. v. State of Tamil Nadu and Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu. The principle from the latter case stated that when a commercial commodity transforms into another distinct commercial commodity, it becomes separately taxable. The decision in South India Automotive Corporation Private Ltd. v. State of Tamil Nadu rejected the argument that no further tax liability arises on the final product if the body had already been taxed, emphasizing that the sale was of the finished vehicle, not separate components.

Judgment: Applying the legal principles from the referenced cases, the High Court found that even though the respondent paid tax on the chassis and built a body over it, the subsequent sale of the lorry as a whole made the tax on the chassis irrelevant. The Court concluded that the Tribunal erred in interfering with the assessing authority's order and set aside the Tribunal's decision, restoring the assessing authority's order. The revision was allowed with no costs incurred.