2019 (11) TMI 1068 - HC - VAT and Sales Tax

Liability of tax - sale of motor bodies - component parts of motor vehicle under Notification No. KA.NI.-2- 306 dated 29.01.2001 or not - Whether on the facts and circumstances of the case, the Tribunal was correct to hold that the notification No. 306 dated 29.1.2001 issued under Section 3A of the Act is rightly applied by treating the construction of bus bodies as component part of the motor vehicle? HELD THAT - It has been rightly pointed out by learned Senior Counsel that bus-body would necessarily have to be treated to be included in the phrase 'motor bodies' used under Notification No. ST-1921/X-905(1)-64 dated 01.05.1968 - the motor bodies or bodies of built or meant to be mounted on chassis of motor vehicles were always treated apart and different from component parts, accessories etc. of motor vehicles. They were made taxable at the specified rates, under the aforesaid notifications. However, that scheme came to be altered upon issuance of notification no. Notification No. ST-II-5784 dated 07.09.1981 as amended by notification no. TT- 2-3402 dated 01.10.1994. Since the notification dated 27.04.1987 only brought the activity of construction of bodies of motor vehicles and construction of trailers under the ambit of Section 3F of the Act for the purposes of taxation without affecting the rate of tax on the goods that may be deemed to have been sold in execution of such works contract, it remains to be examined, the rate of tax that would be leviable on such goods - Even though, it may have been argued by the revenue that in 1987, the commodity bus bodies would have been taxable as motor vehicles by virtue of earlier Notification No. ST-1921 dated 01.05.1968 issued under Section 3A of the Act, however, the material difference in the language of the subsequent notification issued under Section 3A being Notification No. TT-2-3402 dated 01.10.1994 and the subsequent notifications, as have been noted above, would have to be borne in mind. In that regard, the words 'motor bodies' or 'bodies of vehicles' are found to be missing in the taxing notification issued on 01.10.1994 and subsequently. The reference to Entry 18 of Notification No. 306 dated 29.01.2001 is found to be irrelevant, inasmuch as, by that notification, only the words 'and harvester combines' had been added but there was no amendment to subject motor bodies or bodies of motor vehicles to tax as motor vehicles. The question is answered in the negative, i.e. in favour of the assessee and against the revenue.

Summary

Issues:
1. Interpretation of tax liability on sale of motor bodies under Notification No. KA.NI.-2-306 dated 29.01.2001.
2. Determination of tax treatment for the construction of bus bodies under Notification No. 2399 dated 27.4.1987.

Issue 1: Interpretation of tax liability on sale of motor bodies under Notification No. KA.NI.-2-306 dated 29.01.2001:

The revisions were filed against the Trade Tax Tribunal's order, which held the assessee liable for tax on the sale of motor bodies under Notification No. KA.NI.-2-306 dated 29.01.2001. The Tribunal allowed the revenue's appeals, setting aside the first appeal authority's order. The primary questions raised were whether the construction of bus bodies should be considered a component part of a motor vehicle under the said notification and whether the works contract for bus body construction should be taxed under a different notification. The assessee had undertaken contracts to build bus bodies over chassis provided by transporters without selling any chassis or fully constructed buses directly. The assessee initially treated bus bodies as unclassified goods and taxed them at 10 percent under Section 3A(1)(c) of the U.P. Trade Tax Act. However, after facing higher tax assessment, the assessee claimed that the bus body construction was a works contract under Section 3F of the Act.

The High Court analyzed the evolution of relevant notifications and statutes governing the taxation of motor bodies and components. Initially, motor bodies were treated as component parts of motor vehicles under specific notifications. However, subsequent notifications altered this treatment, focusing on components, parts, and accessories separately. The Court emphasized that the omission of specific references to motor bodies in later notifications indicated a deliberate change in taxation treatment. The Court rejected the revenue's argument that bus bodies should still be taxed as component parts, citing the legislative intent behind the amendments. The Court also highlighted the importance of consistency in tax treatment, referencing a Supreme Court decision to support the assessee's position. Ultimately, the Court ruled in favor of the assessee on this issue, concluding that bus bodies should not be taxed as motor vehicles under the current notification.

Issue 2: Determination of tax treatment for the construction of bus bodies under Notification No. 2399 dated 27.4.1987:

Regarding the question of whether the construction of bus bodies should be taxed as a works contract under Notification No. 2399 dated 27.4.1987, the Court found that the assessee's belated claim under Section 22 of the Act was not admissible for consideration. The Court noted that this claim was raised after the Tribunal's decision and had not been adjudicated by the revenue authorities or the Tribunal. Therefore, the Court concluded that this question of law did not arise for consideration in the current case.

In summary, the High Court's judgment addressed the tax liability of the assessee on the sale of bus bodies and the classification of such activities under relevant notifications. The Court clarified the evolving tax treatment of motor bodies and components, ultimately ruling in favor of the assessee and disposing of the revisions accordingly.