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2021 (3) TMI 29 - HC - VAT and Sales TaxClassification of goods - seat covers - cycle locks - whether covered by Entry-12 of Part-A of the Schedule-II and are taxable @4% and 5% or are they covered under the Fifth Schedule and are instead taxable @12.5% and 13.5%? - Whether, the Commissioner of Taxes, Assam while passing the impugned order dated 15-07-2013, has awarded the issue in the correct perspective and followed the law relating to taxing statute in respect of interpretation of items under the Act of 2003? - HELD THAT - The items mentioned in the Entry-12 are bicycle, tricycle, cycle rickshaws and tyres and tubes used for bicycles, tricycles, cycle rickshaws and wheel chair. However, it is not clear as to whether the expression parts thereof is relative to all the items mentioned therein or is it specifically relative only to cycle rickshaws - there is no specific definition attributed to the items parts thereof and accessories in the Assam Value Added Tax Act, 2003 or the Rules framed thereunder and/or in any other circular/notification issued by the department. It is well settled principle of judicial proposition that when there are no definition provided in the statute book, recourse will have to be taken to derive the meaning/attribute from the common parlance as understood in the trade concerned. In order to do that it will be necessary to examine how a cycle and a cycle rickshaw is understood in common parlance as trade. As the said items are not defined in AVAT Act 2003, recourse will have to be taken to the dictionary meanings provided, in order to to make an attempt to determine the Legislative intent that can be attributed to the expression parts thereof . Taking recourse to the doctrine of common parlance it can be accepted that cycle/bicycle which is ordinarily sold in the market comes with all accessories/parts like handle, brakes, mudguards, paddles, bell and seat etc. In common parlance unless the cycle/bicycle is fitted with such items, it is unlikely to be purchased by customer. In other words when a customer comes to the market to purchase a cycle/bicycle, the cycle comes with such necessary parts/fittings enabling a customer to make use of the cycle immediately after purchase without having to fit any other parts in order to effectively use the cycle. This however, does not include the additional fittings that any customer may like to add to the cycle as per their personal taste and/or requirements - when a Bicycle is ordinarily sold to the customer, then it is sold with all necessary fittings/parts in order that the customer can make complete and immediate use of the Bicycle purchased. There is no requirement of adding any parts to the Bicycle before it can be effectively used. Viewed from this perspective the expression parts thereof used by the Legislature in Entry 12, will be rendered redundant in respect of Bicycle/Tricycle unless the term parts thereof can be permitted to be used to mean and include the term accessories as used by the Commissioner of Taxes. For the purpose of rendering the term parts thereof meaningful in respect of all the items in Entry 12 including Bicycle and Tricycle, the term accessories must be understood to be included within the expression parts thereof . The Legislative intent in respect of parts thereof appears to be relative only to the item cycle rickshaw in Entry 12 of Schedule II Part-A. If that meaning is to be attributed then there has to be a proper finding on facts by the Commissioner of Taxes in its clarificatory order that the items which are sold by the petitioner and which are in issue in the present proceeding are exclusively used only for cycle but not for cycle rickshaws. And are therefore not included in the expression parts thereof . However if it appears that items in issue can be/are used both for cycle rickshaw and cycles also, then they will have to be considered as parts unless specifically excluded by the statute and the benefit of the rate of tax under Entry-12 will have to be given to the items in question notwithstanding that they may also be used for cycle/bicycle also - It is a well settled proposition of law that the words used in a statue must be understood in the ordinary and popular sense and not in any technical sense. It is evident that these findings on which facts were necessary have not been considered by the Commissioner of Taxes while passing the impugned order dated 10-07-2013. Unless such finding on facts are undertaken by the Department, the conclusion of the Commissioner of Taxes that cycle seat covers and cycle locks are accessories but not parts in the context of Entry 12, will have to be declared to be erroneous. In view of the fact that besides the lack of factual details necessary to arrive at such a finding by the Commissioner of Taxes it is also noticed that the Commissioner of Taxes being an authority declared under the AVAT Act, 2003, has brought in or made use of the term accessories which is alien to Entry 12 itself of the AVAT Act, 2003. The Commissioner of Taxes being an authority declared under the AVAT Act, 2003 cannot bring any term/expression to decide upon the question of imposition of rate of tax without there being any reference/definition provided for, such item(s)/expression(s) in the Act by the Legislature. The finding arrived at by the Commissioner of Taxes that the items in issue relating to Entry 12 of AVAT Act, 2003 are 'accessories' is contrary to the settled provisions of law. It is also well settled in law that taxing statute must be interpreted in the light of what is fairly expressed. Importation of provision into taxing statute to supply any assumes deficiency is not permissible. The impugned order dated 10-07-2013 passed by the Commissioner of Taxes under section 105 of Assam Value Added Tax Act, 2003 has been rendered without a proper finding of fact necessary to arrive at the conclusion that cycle seat covers and cycle locks are accessories and not parts . There is no finding in the impugned order that in the context of Entry 12 the items which can/will be considered to be parts thereof and as to why, in the context of the present proceedings, the expression accessories should not be included/considered as interchangeable as parts. The Commissioner of Taxes cannot introduce a new terminology accessories when the same is not defined under the Act of 2003. Such exercise will have to held to be beyond the power of Commissioner of Tax delegated under the Act of 2003. Accordingly, the impugned clarificatory order dated 10-07-2013 is interfered with set aside and quashed - The quasi judicial functions of the Deputy Commissioner of Taxes cannot be cannot be held to have been exercised independently with due application of mind and therefore the impugned assessment orders dated 20-07-2013 and the revisional order dated 02-03-2015 confirming the Assessment orders will also have to be held in be bad in law and therefore, the same are also set aside and quashed. The quasi judicial functions of the Deputy Commissioner of Taxes cannot be cannot be held to have been exercised independently with due application of mind and therefore the impugned assessment orders dated 20-07-2013 and the revisional order dated 02-03-2015 confirming the Assessment orders will also have to be held in be bad in law and therefore, the same are also set aside and quashed - Petition allowed by way of remand.
Issues Involved:
1. Legality and validity of assessment orders and revisional orders. 2. Classification of "Cycle Seat Cover" and "Cycle Lock" under the Assam Value Added Tax Act, 2003. 3. Interpretation of the term "parts thereof" in Entry 12 of Schedule-II, Part A of the AVAT Act, 2003. 4. Correctness of the Commissioner of Taxes' clarificatory order dated 10-07-2013. Detailed Analysis: 1. Legality and Validity of Assessment Orders and Revisional Orders: The petitioner challenged the assessment orders dated 20-07-2013 and the revisional orders dated 02-03-2015, which imposed VAT at 12.5% and 13.5% for the years 2009-10 and 2010-11, respectively. The petitioner argued that the items "cycle fluids/lubricants, seat cover, and cycle lock" should be taxed at 4% and 5% as per Entry 12 of Schedule-II, Part A of the AVAT Act, 2003. The department, however, assessed these items under the Fifth Schedule, taxing them at higher rates. 2. Classification of "Cycle Seat Cover" and "Cycle Lock": The core issue revolved around whether "cycle seat covers" and "cycle locks" fall under Entry 12 of Schedule-II, Part A, which includes "Bicycle, Tricycle, Cycle Rickshaw and Tubes and Tyres parts thereof and used for Bicycle, Tricycle, Cycle Rickshaws and wheel chair." The petitioner argued that these items are integral parts of cycles and should be taxed at the rates specified in Entry 12. The department, relying on the Commissioner of Taxes' clarificatory order dated 10-07-2013, classified these items as accessories, not parts, and thus taxed them at higher rates under the Fifth Schedule. 3. Interpretation of the Term "Parts Thereof" in Entry 12: The court examined whether the term "parts thereof" in Entry 12 applies to all items listed or only to specific items like cycle rickshaws. The court noted that in common parlance, bicycles come with necessary parts such as handles, brakes, mudguards, pedals, bells, and seats, making them ready for use without additional fittings. Therefore, the term "parts thereof" should include accessories to render the term meaningful for bicycles and tricycles. The court also considered that the term "parts thereof" might be intended only for cycle rickshaws, which are often sold as frames requiring additional fittings based on customer needs. 4. Correctness of the Commissioner of Taxes' Clarificatory Order: The court found that the Commissioner of Taxes' order dated 10-07-2013 lacked necessary factual findings to support the conclusion that "cycle seat covers" and "cycle locks" are accessories and not parts. The Commissioner introduced the term "accessories," which is not defined in the AVAT Act, 2003, thus overstepping the authority granted under the Act. The court emphasized that statutory provisions must be interpreted in their ordinary and popular sense, and the Commissioner cannot introduce new terminology not provided by the Legislature. Conclusion: The court set aside and quashed the clarificatory order dated 10-07-2013, the assessment orders dated 20-07-2013, and the revisional orders dated 02-03-2015. The matter was remanded back to the Deputy Commissioner of Taxes to redecide the issue afresh based on available materials and as per the provisions of law. The writ petition was allowed to this extent, with each party bearing its own costs.
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