2019 (10) TMI 808 - HC - VAT and Sales Tax

Classification of the item - Levy of Entry Tax - import of electronic goods, computer goods, generators, telecommunication parts, SMPS Power Plant, electrical goods, telecom equipment and SIM cards etc. for the purpose of business - Whether the equipment in question which has been held to be an electronic equipment would be covered by item no. 5 machinery and spare parts of machinery of Schedule referred in Section 4(1) of the U.P. Tax on Entry of Goods Act? HELD THAT - Even if the Tribunal were to find that one or more machinery of value ₹ 10 lac or more was imported by the assessee, yet, it would have to further examine the objection raised by the assessee that the same would stand excluded by virtue of separate entries under the VAT Act providing for separate treatment of such machinery under that Act. In other words, even if one of the electronic machinery say ('x') imported is found to have been imported by the assessee which is of value ₹ 10 lac or more, the Tribunal would have to further examine whether such electronic machinery ('x') was taxable as machinery under the VAT Act or as any other commodity falling under a separate schedule entry under the VAT Act. If the conclusion to be drawn by the Tribunal be that such machinery ('x') was taxable under a separate schedule entry under the VAT Act, it would be further required to examine whether on such distinction under the VAT Act, the commodity would continue to remain taxable as machinery under the Entry Tax Act or it would cease to be taxable on that reasoning. At present, though the Tribunal has touched this issue but its findings are not reasoned. The issue that has been canvased by the assessee in the present revision, has not been squarely dealt with. In any case, since the matter is proposed to be remitted to the Tribunal, the same may be re-adjudicated. Inasmuch as, at present, order passed by the Tribunal does not appear to have dealt with the aforesaid issue, the question of law framed by this court, cannot be answered at this stage - matter is remitted to the Tribunal to pass a fresh order, preferably, within a period of four months in accordance with law after hearing the parties on the strength of evidence existing on record - Revision allowed by way of remand.

Summary

Issues:
Appeal against tribunal's order on entry tax for various assessment years. Interpretation of machinery under Entry Tax Act. Whether electronic equipment falls under machinery category for entry tax.

Analysis:
The revisions were filed against a common order of the Commercial Tax Tribunal, dismissing all appeals related to Entry Tax for different assessment years. The specific case discussed pertained to the assessment year 2001-02, involving an assessee engaged in telecommunication services importing various goods subject to entry tax. The dispute revolved around whether the imported goods, including electronic equipment, should be considered machinery valued at ?10 lac or more under the U.P. Tax on Entry of Goods Act, 2007.

The main question raised was whether the electronic equipment imported by the assessee falls under the category of machinery and spare parts valued at ?10 lac or more, as per the Entry Tax Act. The argument presented was that certain electronic goods, like computers and telecommunication parts, should be excluded from the definition of machinery under the VAT Act, thus impacting their classification for entry tax purposes.

The revisionist's counsel contended that items like telecom towers and electrical apparatus should not be considered machinery, and postulated that subsequent amendments to the Entry Tax Act excluded certain items from taxation. On the other hand, the standing counsel for the revenue opposed the revision, citing precedents and asserting that electronic machinery should not be excluded from the machinery category.

The court observed that while some electronic goods could be classified as machinery, a detailed examination of the imported commodities was necessary to determine if they qualified as machinery valued at ?10 lac or more. The Tribunal's failure to provide a reasoned decision on this crucial issue led to the order being set aside, and the matter was remitted back to the Tribunal for fresh adjudication within a specified timeframe.

The court highlighted the need for the Tribunal to analyze whether the imported goods met the criteria for taxation as machinery under the Entry Tax Act, considering any exclusions under the VAT Act. The lack of discussion on the alternative submissions further necessitated a reevaluation by the Tribunal to address the unresolved issues and provide a well-reasoned decision based on the evidence presented.