2023 (8) TMI 608 - HC - VAT and Sales Tax

Suo moto revision taken under Section 34 of Tamil Nadu General Sales Tax Act, 1959 - Classification of goods - rate of tax - two wheeler and tractor fan belts - goods were specifically included under Entry 50(vi) of Part-D of the first schedule of TNGST Act 1959 or not - HELD THAT - The invoice bills produced by the appellant would clearly establish the fact that the belts that have been sold by them are accessories to two wheeler or a tractor. Therefore, it is clear that the said goods would clearly fall within entry 30 of Part-C of the first schedule attracting 5% tax for the two wheeler parts. As far as the tractor belts are concerned, they fall under entry 27 of Part-B of the first schedule attracting 3% tax. A perusal of item 50(vi) of Part D of the first schedule indicates that it relates to conveyor, transmission or elevator belts or belting of rubber whether combined with any textile material or otherwise which would attract 8% tax - As rightly pointed out by the learned counsel appearing for the appellant the Division Bench in THE STATE OF TAMIL NADU REP. BY THE DEPUTY COMMISSIONER (COMMERCIAL TAXES) VERSUS PM. ENGINEERING AND CO. 2014 (3) TMI 233 - MADRAS HIGH COURT had categorically found that when there is a specific entry to deal with an item in question, the same cannot be brought under the general entry. In the present case, the two wheeler fan belts and tractor fan belts are specifically found mentioned under entry 30 of Part-C and entry 27 of Part-B. Therefore, the first respondent was not right in invoking entry 50 which is a general entry. It is brought to the notice of the Court that the first respondent had initiated suo moto revision proceedings only for the assessment year 1993-1994 and 1994-1995. However, the assessment for the previous and subsequent assessment years have not been subjected to suo moto revision. Therefore, it is clear that the first respondent has cherrypicked the said assessment years for exercising his suo moto powers for reasons best known to him. All the substantial questions of law are answered in favour of the appellant and the order impugned in the petition is set aside and this Tax Case is allowed.

Summary

Issues:
The appeal challenging the order of the first respondent under Section 34 of Tamil Nadu General Sales Tax Act, 1959 regarding the re-assessment of taxable turnover of two-wheeler and tractor fan belts at 8% instead of 5% and 3% respectively.

Judgment Details:

1. The appellant, a manufacturer of automobile fan belts, was re-assessed at 8% tax rate under Entry 50(vi) of Part-D of the TNGST Act for the assessment years 1993-1994 and 1994-1995. The Appellate Assistant Commissioner allowed the appeal, stating the goods are only meant for two-wheelers and tractors, taxable at 5% and 3% respectively. The first respondent initiated suo moto revision under Section 34.

2. The first respondent classified the goods as rubber products, assessing them at 8% under Entry 50(vi) of Part-D, but deleted the penalty under Section 12(3)(b) of TNGST Act. The dealer challenged this order, contending the goods are spare parts and accessories for two-wheelers and tractors, falling under specific entries for 5% and 3% tax.

3. The appellant argued that the goods are specifically meant for two-wheelers and tractors, falling under specific entries for taxation. The appellant also highlighted that the general entry under Entry 50(vi) does not apply to the specific goods in question.

4. The appellant pointed out that the first respondent erred in relying on a previous judgment related to exhaust pipes, emphasizing that specific entries for rubber belting should be considered. The appellant cited relevant judgments to support their classification argument.

5. The appellant further relied on a Division Bench judgment to argue that specific entries should prevail over general entries when classifying items for taxation. The appellant requested the petition to be allowed based on these arguments.

6. The respondents argued that the fan belts are used not only as spare parts for motor vehicles but also for other machineries, justifying the assessment under Entry 50. They requested the order passed by the first respondent to be upheld.

7. The Court considered the submissions and evidence presented. It was established that the goods sold by the appellant are accessories for two-wheelers and tractors, falling under specific entries for taxation at 5% and 3% respectively.

8. The Court noted that the specific entries for two-wheeler and tractor fan belts should apply, rather than the general entry under Entry 50(vi) for rubber belting. The first respondent's invocation of the general entry was deemed incorrect.

9. It was highlighted that the first respondent selectively initiated revision proceedings for specific assessment years, indicating a lack of consistency in exercising suo moto powers.

10. Based on the above considerations, the Court ruled in favor of the appellant, setting aside the impugned order and allowing the Tax Case without costs.