2010 (11) TMI 873 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and validity of the penalty imposed.
2. Rate of tax applicable to the seized goods.
3. Classification of seized goods as "plant" or "machinery."

Issue-wise Detailed Analysis:

1. Legality and Validity of the Penalty Imposed:

The petitioner, a company registered under the Companies Act, 1956, and dealing in measuring machines, imported goods into West Bengal without an endorsed way-bill. The Sales Tax Officer seized these goods and initiated penalty proceedings under Section 73 of the VAT Act, resulting in a penalty of 50% of the assessed value, treating the goods as taxable at 12.5%. The petitioner challenged the rate of penalty but not the seizure's legality. The Tribunal scrutinized the orders from the Assistant Commissioner, Deputy Commissioner, and Additional Commissioner, noting that the penalty rate of 50% was consistently maintained. The Tribunal concluded that the penalty was imposed following the VAT Act's provisions, but the rate of tax on the goods needed reassessment.

2. Rate of Tax Applicable to the Seized Goods:

The petitioner contended that the seized goods, being measuring machines or survey machines, should be taxed at 4% under serial No. 54B of Schedule C, Part I of the West Bengal VAT Act, 2003, as "plant." The respondents argued that the goods were not covered under the specified items in serial No. 54B and were taxable at 12.5%. The Tribunal examined the nature of the goods and relevant legal precedents, including definitions and judicial interpretations of "plant." It found merit in the petitioner's argument that the goods should be classified as "plant" and thus taxable at 4%.

3. Classification of Seized Goods as "Plant" or "Machinery":

The petitioner argued that the seized goods should be classified as "plant" rather than "machinery," citing judicial definitions and decisions, including those from the Supreme Court and High Courts. The Tribunal noted that "plant" is not defined in the VAT Act but is broadly interpreted in tax law to include any apparatus used by a businessman for carrying on his business, provided it has some degree of durability. The Tribunal considered the functional aspects of the goods and certificates from purchasing dealers, which confirmed the goods' essential role in their business. The Tribunal concluded that the seized goods met the criteria for "plant" and should be taxed at 4%.

Conclusion:

The Tribunal held that the seized goods were exigible to tax at 4% as "plant" under serial No. 54B of Schedule C, Part I of the West Bengal VAT Act, 2003. Consequently, the penalty orders required modification to reflect the correct tax rate. The Tribunal directed the respondent to modify the penalty order and issue a revised notice of demand. The application was disposed of with no order as to costs.