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2023 (1) TMI 246 - HC - VAT and Sales TaxClassification of goods - rate of tax - whether tyres and tubes used in tractor-trolley manufactured by the petitioner is liable to be taxed separately @ 12.5% for the tax periods up to 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B or @ 4% in terms of Entry 119 of Part-II of Schedule B appended to the OVAT Act? - Penalty under Section 42(5) of the OVAT Act - applicability of cases of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. 2010 (12) TMI 15 - SUPREME COURT - HELD THAT - It is not in dispute that Entry 119 of Part-II specifically carves out exception. The goods tyres, tubes and flaps are excluded from the words Tractors, threshers, harvesters and attachments and parts thereof used in the said entry. It is stated in M/S. DEEPAK AGRO SOLUTION LTD VERSUS COMMISSIONER OF CUSTOMS, MAHARASHTRA 2008 (5) TMI 8 - SUPREME COURT that what is not excluded would be held to be included - In COMMISSIONER OF CENTRAL EXCISE VERSUS SHREE BAIDYANATH AYURVED BHAWAN LTD. AND VICE VERSA 2009 (4) TMI 6 - SUPREME COURT it is laid down that specific entry must prevail over a general entry. This Court in STATE OF ORISSA VERSUS BHARAT STORE 2002 (2) TMI 1299 - ORISSA HIGH COURT held that it is a settled position of law that a taxing statute is to be strictly construed and the words used are to be given their natural meaning. It is also the settled position that entries in the Schedule are to be interpreted in their popular sense unless they are expressly defined in the enactment. In RAJ BROTHERS AGENCIES AND OTHERS VERSUS THE STATE OF TAMIL NADU 1976 (2) TMI 174 - MADRAS HIGH COURT it has been stated that a special entry overrides a general provision. If main article to which the item in question is accessory or component part is taken out of that item, its accessories and component parts could not be said to have been left untouched. Though batteries may be electrical goods and battery plates are accessories or component parts of such batteries, in view of the specific entry, batteries as such were excluded from general entry. This Court is of the considered opinion that tyres, tubes and flaps being excluded from the purview of preceding words, namely Tractors, Threshers, harvesters, and attachments and parts thereof as contained in Entry 119 of Part-II of Schedule B appended to the OVAT Act, the subject-goods do not fall within ambit of said entry. No specific entry being available, tyres, tubes and flaps are, thus, subject to tax @ 12.5% up to tax period ending on 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B to the OVAT Act. For the aforesaid reasons, the interpretation as suggested by the learned counsel for the petitioner cannot be acceded to. Penalty under Section 42(5) of the OVAT Act - applicability of cases of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. 2010 (12) TMI 15 - SUPREME COURT - HELD THAT - With regard to applicability of ratio of decision in UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT , which has been relied on by the Hon ble Supreme Court in the case of CCE, CHANDIGARH VERSUS PEPSI FOODS LTD. 2010 (12) TMI 15 - SUPREME COURT , needless to say that since they are rendered in different context and under different statutory setting of words, the reliance placed by the petitioner is misplaced. The questions of law are answered in favour of the Revenue and against the petitioner-dealer - Petition dismissed.
Issues Involved:
1. Taxation rate on tyres, tubes, and flaps sold with tractor-trolleys. 2. Legality of penalty confirmation by the Tribunal. 3. Justification of maximum penalty imposition without considering precedent decisions. Issue-wise Analysis: 1. Taxation Rate on Tyres, Tubes, and Flaps: The primary issue was whether tyres, tubes, and flaps sold with tractor-trolleys should be taxed separately at 12.5% and 13.5% or at 4% as part of the tractor-trolley. The Tribunal held that as per Entry 119 of Part-II of Schedule B of the OVAT Act, tyres, tubes, and flaps are explicitly excluded from the 4% tax rate applicable to tractor-trolleys and are instead taxed at 12.5% (up to 31.03.2011) and 13.5% (after 01.04.2011) as unspecified goods under Part-III of Schedule B. The Court affirmed this interpretation, emphasizing that specific exclusions in tax statutes must be strictly construed and that specific entries override general ones. This principle was supported by multiple precedents, including Deepak Agro Solution Ltd. v. Commissioner of Customs and CCE v. Shree Baidyanath Ayurved Bhawan Ltd. 2. Legality of Penalty Confirmation: The second issue concerned the legality of the penalty imposed under Section 42(5) of the OVAT Act. The Court referenced its previous decision in State of Odisha v. Chandrakanta Jayantilal, which upheld the constitutional validity of Section 42(5), mandating a penalty equal to twice the amount of tax assessed without discretion for reduction by the Assessing Officer. The Court reiterated that the penalty is automatic following an assessment under Section 42(4), distinguishing it from penalties under Section 43(2), which allow for discretion based on the reasonableness of the cause for tax underassessment. 3. Justification of Maximum Penalty Imposition: The third issue was whether the Tribunal erred by not considering the decisions in Union of India v. Rajasthan Spinning & Weaving Mills and Commissioner of Central Excise, Chandigarh v. Pepsi Foods Ltd. The Court found these precedents inapplicable, as they were decided under different statutory contexts. The Court emphasized the principle that legal precedents must be applied contextually, noting that the OVAT Act's specific provisions regarding penalties were clear and unambiguous. Conclusion: The Court concluded: A. The Tribunal was justified in taxing tyres, tubes, and flaps separately at 12.5% and 13.5%, rather than at 4%, when sold with tractor-trolleys. B. The confirmation of the penalty by the Tribunal was correct, as the penalty under Section 42(5) is mandatory and non-discretionary. C. The Tribunal was correct in imposing the maximum penalty without considering the cited precedents, as they were not applicable to the statutory context of the OVAT Act. Final Decision: Both revision petitions were dismissed, affirming the Tribunal's decisions on all counts, with no order as to costs.
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