2015 (10) TMI 46 - HC - VAT and Sales Tax

Levy of tax under the provisions of the Karnataka Tax on Entry of Goods Act, 1979 - Classification of product - Whether L & T 752 vibratory compactor is a motor vehicle or a machinery and therefore, liable to tax under the KTEG Act - Held that - Under the Scheme of KTEG Act, Chapter II deals with levy of tax. Section 3 is the charging section. It provides that, the tax shall be levied on entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein. Chapter IIA deals with levy of tax on motor vehicles exclusively. Section 4A is the definition section which defines what a motor vehicle is under section 4A(d). Section 4B is the charging section in so far as motor vehicles are concerned. It starts with a non obstante clause. It provides that, notwithstanding anything contained in section 3, there shall be levied and collected a tax on the purchase value of a motor vehicle on entry of which is effected into a local area for use or sale therein and which is liable for registration or assignment of a new registration mark in the State under the Motor Vehicles Act, 1988. The rate at which tax is levied on such motor vehicle is at the rate specified in the notification to be issued. Understanding of the Government is that tax is leviable under section 4B, on all earth movers, dippers and bulldozers and the like and not under section 3. The Revenue relies on the Notification No. FD 11 CET 2002(1) dated March 30, 2002 where the tax is levied under section 3 of the KST Act on machinery (all kinds and parts and accessories thereof but excluding agricultural machinery). If we read these two notifications, keeping side by side, the understanding of the State is earth movers, dumpers, dippers, bulldozers and the like and adopted for uses on road do not fall within the meaning of the word machinery (all kinds). - the contention of the Revenue that the motor vehicle is not registered, it cannot be treated as motor vehicle and has to be treated as machinery is without any substance. - Decided against Revenue.

Summary

Issues Involved:
1. Classification of L & T 752 Vibratory Compactor as a "motor vehicle" or "machinery".
2. Applicability of Karnataka Tax on Entry of Goods Act, 1979 (KTEG Act) versus Karnataka Sales Tax Act, 1957 (KST Act).
3. Requirement of registration under the Motor Vehicles Act, 1988 for tax liability under the KTEG Act.

Issue-Wise Detailed Analysis:

1. Classification of L & T 752 Vibratory Compactor:
The primary issue was whether the L & T 752 vibratory compactor should be classified as a "motor vehicle" or "machinery". The Karnataka Appellate Tribunal (KAT) held that the compactor is a "motor vehicle" and not liable to tax under the KTEG Act. The State contested this, arguing that previous judgments under the Karnataka Sales Tax Act (KST Act) classified vibratory compactors as "earth moving machinery" and not motor vehicles. The court examined these judgments and found that under the KST Act, vibratory compactors were classified as earth moving machinery, thus falling under entry 1(i)(a) of Part M of the Second Schedule, which deals with machinery and parts.

2. Applicability of KTEG Act versus KST Act:
The court analyzed the applicability of the KTEG Act versus the KST Act. It was noted that the definitions and entries under the KST Act could not be directly applied to the KTEG Act. The KTEG Act has its own definitions, and the term "motor vehicle" is defined under Section 4A(d) of the KTEG Act, which refers to the definition under the Motor Vehicles Act, 1988. The court emphasized that the classification under the KST Act does not influence the classification under the KTEG Act.

3. Requirement of Registration under the Motor Vehicles Act:
The court examined whether the lack of registration under the Motor Vehicles Act, 1988 would exclude the compactor from being classified as a motor vehicle under the KTEG Act. Section 4B of the KTEG Act, which deals with the levy of tax on motor vehicles, states that tax is levied on motor vehicles that are liable for registration under the Motor Vehicles Act. The court referred to the apex court's judgment in Bose Abraham v. State of Kerala, which held that vehicles suitable for use on roads, even if used in enclosed premises, are considered motor vehicles and are liable for registration.

The court concluded that the compactor, being mechanically propelled and adapted for use on roads, falls under the definition of "motor vehicle" as per Section 2(28) of the Motor Vehicles Act, 1988. The fact that the compactor was not registered under the Motor Vehicles Act did not exclude it from being classified as a motor vehicle for the purposes of the KTEG Act.

Conclusion:
The court held that the compactor is a "motor vehicle" under the KTEG Act and not "machinery" as contended by the Revenue. The judgments under the KST Act were not applicable to the KTEG Act. The substantial question of law was answered in favor of the assessee, and the revision petition was dismissed with no costs.