2017 (3) TMI 51 - HC - VAT and Sales Tax

Classification of goods - Whether the Tribunal is right in law in holding that the Arecanut peeling/de- husking machine is classifiable under Agricultural implements not operated manually or not driven by animals falling under Entry No.1 of III Schedule to the KVAT Act? - Held that - in view the composition of the product and its exclusive use for agricultural purpose, it can be said as an Agricultural Implement . The peeling/de-husking of arecanut berries is an aspect which is directly attributable to the agricultural activity after the crop of berries are harvested, before taken to the market - the view taken by the Tribunal cannot be said to be erroneous - petition dismissed - decided in favor of assessee.

Summary

Issues: Classification of Arecanut peeling/de-husking machine under the Karnataka Value Added Tax Act

Issue 1: Classification of Arecanut peeling/de-husking machine under the KVAT Act
The petitioner, the revenue, raised a question regarding the classification of the Arecanut peeling/de-husking machine under the KVAT Act. The Tribunal had classified the machine under "Agricultural implements not operated manually or not driven by animals" falling under Entry No.1 of the Third Schedule of the Act. The petitioner challenged this classification, leading to the present petition before the High Court.

Analysis:
The Tribunal, after detailed examination of the facts and nature of the machine, its use, marketability, and other relevant aspects, concluded that the Arecanut peeling/de-husking machine falls under "Agricultural Implements Not Operated Manually Or Not Driven By Animals." This classification was based on the common parlance test and marketability tests. The High Court observed that the Tribunal's finding of fact was beyond the scope of judicial review as it was a question of law. Even if considered a question of law, due to the exclusive use of the machine for agricultural purposes, it could be classified as an "Agricultural Implement." The activity of peeling/de-husking Arecanut berries is directly related to agricultural activities, making it essential for agricultural purposes. Therefore, the High Court upheld the Tribunal's classification, stating that it was not erroneous.

Conclusion:
The High Court dismissed the petition, affirming the Tribunal's classification of the Arecanut peeling/de-husking machine under "Agricultural implements not operated manually or not driven by animals" as per the Third Schedule of the KVAT Act. The Court found no error in the Tribunal's decision, emphasizing the machine's exclusive use for agricultural purposes and its direct connection to agricultural activities.