2022 (8) TMI 771 - HC - VAT and Sales Tax

Validity of assessment order - benefit of concessional rate of tax - turnover from sale of scientific equipments and instruments to educational institutions, hospitals, laboratories and institutions, premised upon the satisfaction of certain conditions - benefit of Notification No. II (1)/CT RE/38/76 dated 11.02.1976 - HELD THAT - There is no dispute on the position that the certificates as required under the appendix to the Notification have been furnished by all the recipient colleges. Thus, one condition of the Notification has, admittedly, been complied with. The dispute arises with regard to the second condition, that is, as to whether the goods supplied,being a lathe, drillingand hopping machines,satisfy the definition of 'scientific equipment and instruments' that form the thrust of the Notification. As regards the lathe, drilling machine and hopping machine at issue, there is no dispute posed that the recipient colleges are technical/engineering colleges that have utilized/deployed these machines in the teaching/instruction of the respective courses. The impugned order of assessment also does not make any adverse observation in regard to this aspect of the matter, that is to say, there is no allegation that the machines in question have been used for any purpose other than education. The conclusion arrived at by the authority fails, the impugned assessment orders are set aside - Petition allowed.

Issues:
Challenge to assessment orders for levy of Central Sales Tax under Tamil Nadu Value Added Tax Act, 2006 based on a concessional rate of tax for sale of scientific equipment to educational institutions, hospitals, laboratories, and institutions.

Analysis:
1. The petitioner contested assessment orders dated 30.05.2019 under the Tamil Nadu Value Added Tax Act, claiming the benefit of a Notification providing for a concessional rate of tax on the sale of scientific equipment to specific institutions.
2. The assessment orders accepted the petitioner's claim without detailed discussion, prompting the issuance of notices proposing revision due to alleged non-compliance with C Forms for inter-state sales of capital goods.
3. The petitioner objected, asserting entitlement to the Notification's benefits, which aim to promote the sale of scientific equipment to specified institutions without profit motives.
4. The Notification specifies conditions for concessional tax rates on inter-state sales of scientific equipment to eligible institutions, emphasizing the non-profit motive of the recipient institutions.
5. Conditions include the nature of the goods as scientific equipment and instruments and the non-profit status of the recipient institution engaged in educational, research, or similar activities.
6. Educational institutions must confirm their non-profit educational objectives through a prescribed form to qualify for the concessional tax rate under the Notification.
7. The Notification's detailed provisions aim to regulate the concessional tax treatment for specific transactions involving scientific equipment sales to designated institutions.

Analysis (contd.):
8. Dispute arose over whether specific equipment like lathes, drilling, and hopping machines qualify as 'scientific equipment and instruments' under the Notification's scope.
9. The petitioner cited legal precedents and clarifications to support the broad interpretation of 'scientific equipment and instruments,' including references to measuring instruments, apparatuses, and equipment used in research.
10. Previous court interventions and directions supported the petitioner's entitlement to exemption claims similar to the present case.
11. Conversely, the Government Advocate argued against categorizing lathes and drilling machines as scientific equipment, referencing a previous case involving steam boilers' classification.
12. The court emphasized strict interpretation of exemption notifications, highlighting the need to adhere to the notification's intended scope and not extend benefits beyond the specified criteria.
13. The court differentiated the present case from past judgments involving dissimilar circumstances, emphasizing the educational purpose and non-profit nature of the recipient institutions.
14. The court found no adverse observations regarding the educational use of the disputed machines in technical/engineering colleges, leading to the setting aside of the assessment orders and allowing the writ petitions.

This comprehensive analysis covers the legal nuances and arguments presented in the judgment, addressing the issues raised in the challenge to the assessment orders under the Tamil Nadu Value Added Tax Act.

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