2014 (1) TMI 672 - HC - VAT and Sales Tax

Rate of tax - Classification u/s 77 - Interpretation of Motor vehicle - Held that - Motor Vehicle is not specifically mentioned in any of the Schedules to the Act of 2005. A common entry Plant and machineries of all description is found at item No.91 of Schedule-III. It is also not in dispute that neither the term Plant and machinery nor the term Motor Vehicle is defined in the Act of 2005 - motor vehicle is one which transports goods or the passengers. For example, a chassis without a body attached to it is a motor vehicle within the meaning of the Motor Vehicles Act. However, in common parlance no person would ever consider a chassis to be a motor vehicle. So far as the present matter is concerned, none of the aforesaid equipments is meant for or designed to transport goods or passengers - equipments are not the motor vehicle as held by the Commissioner of Commercial Taxes under the impugned order dated 24th March 2011. Plant in a common parlance will be a series of machineries, apparatus and the accessories used for the manufacture of the end product. A plant may be a continuous set of machineries or may be divided in segments. But those machineries, apparatus and the accessories all are necessary for manufacture of the end product. There is no dispute that the above referred equipments are indeed used for construction of the roads. Without the said equipments, no business engaged in construction of the roads can function. Even the Road rollers, which undoubtedly ply on the road is a construction equipment insofar as it has no use other than for pressing the soil, grit and tar on the road surface. Without a Road Roller, no road can be completed - Decided in favour of assessee.

Summary

Issues Involved:

1. Classification of road construction equipment under the Bihar Value Added Tax Act, 2005.
2. Determination of applicable tax rate for road construction equipment.
3. Interpretation of "plant and machinery" vs. "motor vehicles" under the Act of 2005.

Detailed Analysis:

1. Classification of Road Construction Equipment:

The primary issue in this case is the classification of various road construction equipment manufactured by the petitioner under the Bihar Value Added Tax Act, 2005. The petitioner, a company engaged in manufacturing road construction machinery, argued that their equipment should be classified as "plant and machinery" under Entry 91 of Schedule-III of the Act of 2005. In contrast, the Commissioner of Commercial Taxes classified these as "motor vehicles" under the Motor Vehicles Act, 1988, thereby treating them as residual items subject to a higher tax rate of 12.5%.

2. Determination of Applicable Tax Rate:

The dispute centers on the tax rate applicable to the road construction equipment. If classified as "plant and machinery," the tax rate would be 4% (5% from April 1, 2012). However, if classified as "motor vehicles" and treated as residual items, the tax rate would be 12.5%. The petitioner contended that the equipment is used solely for construction purposes and not for transportation of goods or passengers, thus should fall under "plant and machinery."

3. Interpretation of "Plant and Machinery" vs. "Motor Vehicles":

The court examined the definitions and common parlance understanding of "plant and machinery" and "motor vehicles." The petitioner argued that their equipment, though mounted on wheels for mobility, is not used for transportation and thus should not be classified as motor vehicles. The court noted that neither term is defined in the Act of 2005, necessitating reliance on common parlance and judicial precedents.

The court referred to multiple judgments to conclude that machinery need not be fastened to the earth to be considered "plant and machinery." It highlighted that the equipment in question is essential for road construction and does not serve the purpose of transporting goods or passengers. The court also considered the legislative history, noting the omission of "Road rollers and other road construction equipment" from Schedule-III, which previously included them explicitly.

Conclusion:

The court concluded that the road construction equipment manufactured by the petitioner should be classified as "plant and machinery" under Entry 91 of Schedule-III of the Bihar Value Added Tax Act, 2005. It rejected the Commissioner's classification of the equipment as "motor vehicles" and ruled that the equipment is subject to a tax rate of 4% (5% from April 1, 2012). The petition was allowed, and the legal consequences followed accordingly.