2017 (9) TMI 1728 - HC - VAT and Sales Tax

Reopening of assessment - demand of differential tax - classification of Crusher machine - Held that - Ass per the statutory scheme of payment of compounded tax under Section 8 (f), the tax payable is based on the production capacity of the machine, which in turn is determined by the jaw size of the crushing machine concerned. The capacity of the machine, based on the power of the motor affixed to the machine, is not the criteria that is specified under the Act for classifying a machine for the purposes of tax. The material received from the Mining and Geology Department is wholly irrelevant to the determination of the capacity of the machine for the purposes of payment of tax under the KVAT Act - Petition allowed - decided in favor of petitioner.

Summary

Issues:
Assessment under the Kerala Value Added Tax Act for the assessment years 2012-2013 and 2013-2014 based on the classification of crushing machines as primary and secondary, and the impact of motor power on classification.

Analysis:
The petitioner, an assessee under the KVAT Act, carried out crushing operations using three crushers: one primary and two secondary crushers of different sizes. The petitioner opted for compounded tax payment under Section 8 (b) of the KVAT Act, based on the jaw sizes of the machines used. The respondents sought to reopen the assessment for the mentioned years, contending that one secondary crusher should be reclassified from size II to size III due to information from the Mining and Geology Department indicating that a machine with a motor power exceeding 30 HP should be classified as size III. This led to the issuance of assessment orders (Exts.P10 and P11) demanding differential tax from the petitioner.

During the hearing, the Government Pleader argued that the reclassification was based on information from the Mining and Geology Department, suggesting that machines with over 30 HP should be classified as size III. However, the court found that the tax payment under Section 8 (f) of the KVAT Act is determined by the production capacity based on the jaw size of the crushing machine, not the motor power. The court ruled that the material from the department was irrelevant for tax payment purposes. Since the petitioner's declaration of jaw sizes was undisputed at the tax payment selection, the court concluded that the assessment orders were unsustainable as they imposed a differential tax based on an incorrect criterion not specified in the statute. Consequently, the court quashed Exts.P10 and P11 assessment orders and granted relief to the petitioner.