1994 (1) TMI 288 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the classification of rubber flaps for taxation under the U.P. Sales Tax Act.
2. Determination of whether rubber flaps are to be considered as accessories of motor vehicles or unclassified items for taxation purposes.

Detailed Analysis:
The judgment by the Allahabad High Court under M.C. Agrawal, J., involves revision petitions under Section 11 of the U.P. Sales Tax Act, addressing a common question of law regarding the classification of rubber flaps for taxation. The revisions pertain to M/s. J. G. Rubber Manufacturing Company Limited and M/s. United Copiex (India) Pvt. Ltd., challenging the Sales Tax Tribunal's orders dismissing their appeals for assessment years 1986-89 related to U.P. Sales Tax. The core issue revolves around whether rubber flaps should be taxed as unclassified items at 8% or as accessories of motor vehicles under Item 43 of the Schedule.

The revisionists, manufacturers of rubber flaps, argued that the rubber flaps should be taxed as unclassified items as they do not fall under any specific item in the Schedule. However, the Assessing Officer taxed the turnover of rubber flaps under sub-clause (2) of Item 43, treating them as accessories of motor vehicles. The Tribunal upheld this assessment, considering rubber flaps as accessories based on their usage in heavy motor vehicles like buses and trucks. The primary function of rubber flaps was deemed to be the protection and support of rubber tubes in the wheels of heavy automobiles.

The Court analyzed precedents, including a judgment by the Kerala High Court in Modi Rubber Limited v. State of Kerala, where rubber flaps were classified as rubber products under a specific entry. Another reference was made to the State of Orissa v. Dunlop India Limited case, which did not conclusively address the nature of rubber flaps as accessories of motor vehicles. The Court also cited a previous judgment by the Allahabad High Court, emphasizing that the rubber flap is indeed a rubber product but maintained that it could still be considered an accessory of a motor vehicle under the U.P. Sales Tax Act.

In light of the arguments and precedents, the Court referred to a Supreme Court judgment in M/s. Mehra Brothers v. Joint Commercial Officer, establishing criteria for determining whether an article qualifies as an accessory of a motor vehicle. Applying these criteria to the case at hand, the Court concluded that the rubber flap, used exclusively for the protection and support of rubber tubes in heavy automobile wheels, should be treated as an accessory of a motor vehicle. The Court dismissed the revisions, affirming the Tribunal's decision to tax the turnover of rubber flaps as accessories of motor vehicles under the U.P. Sales Tax Act.