2009 (7) TMI 1176 - HC - VAT and Sales Tax

Concessional rate of tax from eight per cent to four per cent - Whether not applicable to the assessee as he has stated that it is a mere packaging material? Held that - The assessee is able to establish that what was manufactured and supplied is in consonance with the said G. O., viz. cones and there cannot be any interpretation made by the Joint Commissioner on suo motu application stating that the cones are only paper cones and such paper cones could not be used for manufacturing purpose or in the alternative that cones could have been only used for packaging materials are unwarranted and unjustified. As rightly pointed out in the G.O. it is not the difference between the metal or paper cone, what is stated is only cones. So long as the cones has been supplied, the assessee has made out a very good case for invoking the provision of the said G.O. and as rightly pointed out and held by the Appellate Assistant Commissioner, the reduced rate of tax is correctly applied to the assessee concerned. In favour of assessee.

Summary

Issues:
1. Interpretation of G.O.P. No. 1316/CT & RE dated October 7, 1988 regarding the concessional tax rate for textile machinery spares.
2. Classification of paper cones sold by the assessee as packaging material or textile machinery spares.
3. Validity of the Joint Commissioner's decision to levy tax on paper cones sold by the assessee.

Analysis:
1. The primary issue in this case revolved around the interpretation of G.O.P. No. 1316/CT & RE dated October 7, 1988, which provided a concessional tax rate for certain textile machinery spares, including bobbin, cones, and tubes. The assessee contended that the paper cones sold to spinning mills fell under the category of textile machinery spares as per the specific items listed in the G.O. The Appellate Assistant Commissioner initially granted the exemption based on this interpretation, but the Joint Commissioner, in a suo motu action, negated this contention, stating that the paper cones were merely packaging material and not covered under the concessional tax rate.

2. The second issue involved the classification of the paper cones sold by the assessee. The Joint Commissioner argued that the paper cones did not qualify as textile machinery spares under the G.O. and were solely used for packaging purposes. However, the assessee argued that the G.O. specifically included "cones" as one of the listed items eligible for the concessional tax rate, irrespective of the material they were made of. The assessee maintained that the paper cones supplied to spinning mills were indeed covered under the G.O. as textile machinery spares, emphasizing that the material of the cones was not a determining factor.

3. Lastly, the validity of the Joint Commissioner's decision to levy tax on the paper cones was challenged by the assessee. The High Court, upon careful examination of the G.O. and the facts of the case, found that the paper cones supplied by the assessee to spinning mills qualified as textile machinery spares under the G.O. provisions. The Court held that the Joint Commissioner's interpretation, which focused on the material of the cones rather than the broad category of "cones" specified in the G.O., was unwarranted. Consequently, the Court set aside the Joint Commissioner's order and restored the Appellate Assistant Commissioner's decision to apply the reduced tax rate of four per cent to the assessee's sales of paper cones to spinning mills. The Court ruled in favor of the assessee on both legal questions raised and allowed the revision.