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2015 (8) TMI 498 - HC - VAT and Sales TaxTools-open jaw spanners Interpretation of Entry Entry 6(ix) of BST and Entry 14(iv)(ix) of CST Whether interpretation of Entry 6(ix) of Bombay Sales Tax Act, 1959 and Entry No.14(iv)(ix) of Central Sales Tax Act, 1956, tools open jaw spanners attract tax liability @ 4% or should be treated as Entry No.102 of BST, 1959 Held that - iron and steel were main descriptive part as per entry 14(iv)(ix) Upon careful perusal of Entry in question, CST and BST has identical entry Supreme Court in case of State of Tamil Nadu v/s Pyare Lal Malhotra 1976 (1) TMI 151 - SUPREME COURT OF INDIA , observed that there were no dispute that Entry No.(iv) in Section 14 of CST, as originally worded, was meant to enumerate separately taxable goods and not just to illustrate one taxable substance, i.e, iron and steel Each subitem in Entry No.(iv) was separately taxable commodity for purpose of sales tax and each of them forms separate species for each series of sales although they may all belong to genus, iron and steel Object of Legislature was to tax sale of each commercial commodity and not sale of substance out of which it was made Therefore Tribunal did not commit any error Decided in favour of Assessee.
Issues Involved:
1. Interpretation of Entry 6(ix) of Schedule B of the Bombay Sales Tax Act, 1959, and Entry No.14(iv)(ix) of the Central Sales Tax Act, 1956. 2. Legality of allowing the Assessee to raise an additional ground regarding the rate of tax in the Second Appeal when it was not raised in the first appeal. Detailed Analysis: 1. Interpretation of Entry 6(ix) of Schedule B of the Bombay Sales Tax Act, 1959, and Entry No.14(iv)(ix) of the Central Sales Tax Act, 1956: The primary issue was whether "tools - open jaw spanners" should attract a tax liability of 4% under Entry 6(ix) of Schedule B of the Bombay Sales Tax Act, 1959, and Entry No.14(iv)(ix) of the Central Sales Tax Act, 1956, or fall within the scope of residuary Entry No.102 of Schedule C Part II of the Bombay Sales Tax Act, 1959, which would attract a higher tax rate. The Tribunal had previously ruled in favor of the Assessee, holding that the "tools" in question were declared goods and thus subject to a 4% tax rate. The Revenue opposed this, arguing that the original assessment orders did not include this issue and that the additional ground should not have been allowed at the second appellate stage. The Tribunal's decision was based on the interpretation of the relevant entries and a precedent set by the High Court in Ranchhoddas Bhaichand v/s Commissioner of Sales Tax, Maharashtra State. The court examined the entries and relevant case law, including the Madhya Pradesh High Court's decision in National Lock Stores, which held that tools like screwdrivers and saws fall under the expression "tool" and should be taxed at 4%. The court also referred to the Supreme Court's judgments in Bengal Iron Corporation and Vasantham Foundry, which discussed the interpretation of similar entries. The court concluded that the Tribunal did not err in its interpretation. The term "tool" in the entry should be read independently of "alloy and special steels," meaning that tools made of iron and steel fall under the declared goods category and attract a 4% tax rate. The court found no merit in the Revenue's argument that the term "tool" should be read in conjunction with "alloy and special steels." 2. Legality of Allowing the Assessee to Raise an Additional Ground: The second issue was whether the Tribunal was justified in allowing the Assessee to raise an additional ground regarding the tax rate in the Second Appeal, despite not raising it in the first appeal. The Revenue argued that this was not permissible and that the Tribunal's reliance on the Ranchhoddas Bhaichand case was misplaced. The court found that the Tribunal had allowed the additional ground based on the fact that the penalty orders were part of the assessment order. The Tribunal had permitted the Assessee to raise the additional ground in relation to the periods 01.01.1988 to 31.03.1989, Financial years 1989-1990 and 1990-1991, covered by the Second Appeal Nos. 687, 688, and 689 of 1995. The Tribunal noted that the additional ground was raised in relation to composite orders of assessment and penalties. The court held that the Tribunal did not commit any error or perversity in allowing the additional ground to be raised. The Tribunal's approach was justified as the question of taxability goes to the root of the case and raises a vital issue of interpretation of the entry in question. The court found that no prejudice had been caused to the Revenue, as all arguments were noted and considered. Conclusion: The court answered the reference against the Revenue and in favor of the Assessee. The Tribunal's interpretation of the tax entries was upheld, and the decision to allow the additional ground in the Second Appeal was deemed appropriate. The court refused the Revenue's request for a certificate to appeal to the Supreme Court, concluding that no question of law of general public importance arose from the reference. The reference was disposed of with no costs.
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