2016 (10) TMI 720 - HC - VAT and Sales Tax

Taxability of a Car Stereo System - electronic goods falling under Entry 75 or motor vehicle falling under Entry 18 - Whether a Car Stereo System was liable to be taxed under Entry 75 of a Notification dated 13 December 2002 or whether it was liable to be classified and taxed on the basis of it falling under Entry 18 of the Notification dated 29 January 2001 as amended and reiterated vide Notification dated 9 May 2003? - whether a car stereo is liable to be viewed as an accessory to a motor vehicle? - Held that - A car stereo is undoubtedly available as an article in an automobile market or shop or a place of manufacture. The Tribunal noted that in many cases a car stereo is either pre-fitted in a motor vehicle and in other instances fitted subsequently. A car stereo, in the opinion of this Court, would therefore be liable to be treated as an accessory. It cannot be gainsaid that a car stereo does add to the comfort for the use of a motor vehicle. It enables a driver undertaking a long journey to enjoy the ride and makes the trip pleasurable. Viewed in this sense, it must be held to be an article which adds to the comfort for the use of the motor vehicle. In view of the above, whether the Court applies the comfort test or whether it applies the test of whether an article can be said to be available for sale in an automobile market, on both scores, the car stereo held as an accessory. The entry of accessories was placed specifically in the company of and under the heading of motor vehicles. The other competing entry upon which reliance was placed was of microwave ovens and all other electronic goods not specified anywhere else . Even if a car stereo be viewed as electronic goods , they would stand comprised in Entry 18 by virtue of being an accessory to a motor vehicle. They were in this sense,though electronic goods, but since specified elsewhere they would stand excluded and extracted from Entry 75 - car stereo held as accessory - revision application dismissed - decided in favor of Revenue.

Summary

Issues Involved:
1. Classification of Car Stereo System for tax purposes under different entries of notifications.
2. Applicability of the principle of res judicata in tax assessment proceedings.
3. Interpretation of legal precedents regarding accessories to motor vehicles.

Detailed Analysis:

1. Classification of Car Stereo System:
The primary issue was whether a Car Stereo System should be taxed under Entry 75 of the Notification dated 13 December 2002, which pertains to electronic goods, or under Entry 18 of the Notification dated 29 January 2001, which deals with motor vehicle accessories. The court examined the competing entries and noted that Entry 75 included a broad range of electronic goods, while Entry 18 specifically addressed motor vehicle components, parts, and accessories.

The Tribunal initially held that Car Stereos were electronic goods under Entry 75. However, upon reconsideration, it classified Car Stereos as accessories to motor vehicles under Entry 18, following the principles laid down by the Supreme Court in Mehra Bros. Vs. The Joint Commercial Officer, Madras and Pragati Silicons (P) Ltd. Vs. Commissioner of Central Excise, Delhi. The court emphasized the tests from Mehra Bros., which included whether the article is an adjunct or addition for the convenient use of other parts of a vehicle, adds to the beauty, elegance, or comfort for the use of the motor vehicle, and whether it is supplementary or secondary to the main or primary purpose.

2. Applicability of Res Judicata:
The court addressed whether the principle of res judicata applied to tax assessment proceedings. It noted that the Tribunal had correctly held that res judicata does not apply to tax assessments, which are inherently subject to change based on new evidence or interpretations.

3. Interpretation of Legal Precedents:
The court analyzed the precedents set by the Supreme Court in Mehra Bros. and Pragati Silicons. In Mehra Bros., the Supreme Court considered whether car seat covers were accessories to motor vehicles and established tests for determining what constitutes an accessory. The court rejected the narrow test that an accessory must add to the convenience or effectiveness of the use of the car as a whole. Instead, it adopted a broader view that included items that add to the comfort or enjoyment of the vehicle, such as stereos and air conditioners.

Applying these principles, the court concluded that a Car Stereo is indeed an accessory to a motor vehicle as it adds to the comfort and enjoyment of the vehicle. It noted that Car Stereos are available in automobile markets and are often fitted in vehicles either pre-sale or post-sale, further supporting their classification as accessories.

Conclusion:
The court dismissed the revisions, holding that Car Stereos are accessories to motor vehicles and should be taxed under Entry 18. This decision was based on the broader interpretation of what constitutes an accessory as established by the Supreme Court, and the specific inclusion of motor vehicle accessories in Entry 18 over the general category of electronic goods in Entry 75.