2010 (6) TMI 727 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of industrial fans as "machinery for tea industry" under the West Bengal Value Added Tax Act, 2003.
2. Appropriate rate of tax applicable to the industrial fans.
3. Validity of the order dated March 4, 2009, passed by the Commissioner of Sales Tax, West Bengal.

Detailed Analysis:

1. Classification of Industrial Fans as "Machinery for Tea Industry":

The petitioner, a manufacturer of industrial fans, claimed that the fans are used in tea processing industries and should be classified as "machinery for tea industry" under entry 54B(i) of Part I of Schedule C to the West Bengal Value Added Tax Act, 2003 (VAT Act). The petitioner detailed the tea manufacturing process, explaining the use of various fans (axial flow, centrifugal type) at different stages such as withering, rolling, fermenting, and drying. The petitioner argued that these fans are integral to the tea manufacturing process and should be considered machinery.

2. Appropriate Rate of Tax Applicable to the Industrial Fans:

The petitioner received a notice from the Sales Tax Officer directing her to produce financial records. Following an investigation, officers opined that the fans were taxable at 12.5% as unspecified items. The petitioner sought clarification from the Commissioner of Sales Tax, who confirmed that the fans were unspecified items and taxable at 12.5%. The petitioner challenged this, arguing that the fans should be taxed at 4% as machinery under entry 54B(i) of Schedule C to the VAT Act. The petitioner supported this by referring to the Central Excise Tariff and various judicial decisions, asserting that the fans are recognized as machinery in the trade.

3. Validity of the Order Dated March 4, 2009:

The petitioner contested the order dated March 4, 2009, arguing that the Commissioner arbitrarily distinguished between "plant and machinery" and the fans manufactured by the petitioner. The Tribunal examined whether the fans fall within the meaning of "machinery for tea industry" under entry 54B(i) of Schedule C. The Tribunal referenced the Supreme Court's definition of machinery in Commissioner of Income-tax v. Mir Mohammad Ali and the Allahabad High Court's decision in Commissioner, Sales Tax, U.P. v. Uma Shanker Persad and Co., which classified air blowing instruments as machinery. The Tribunal concluded that the fans are indeed machinery as they transmit and modify power, force, and motion, and are used in the tea manufacturing process.

Conclusion:

The Tribunal set aside the order dated March 4, 2009, holding that the industrial fans manufactured by the petitioner fall within the meaning of "machinery for tea industry" under entry 54B(i) of Schedule C to the VAT Act and are therefore taxable at 4%. The petition was disposed of with no order as to costs.