2009 (7) TMI 1185 - HC - VAT and Sales Tax

Whether the item power tillers is taxable at 12.5 per cent under the Assam Value Added Tax Act, 2003 for the period May 1, 2005 to July 28, 2005, i.e., prior to its inclusion in serial No. 65 of the Second Schedule to the enactment? Held that - The unsubstantiated plea of the legislative intendment of exclusion of power tillers from the purview of agricultural implement contemplated in entry 1 of the Second Schedule to the Act, in the absence of any tangible and persuasive materials on record in support thereof thus cannot validate the order impugned. The fact that the same rate of tax for an agricultural implement envisaged in entry 1 of the Second Schedule to the Act as well as power tillers on its insertion in entry 65 thereof has been maintained, cannot also be lost sight of. Had it been the intention of the Legislature to distinguish a power tiller from an agricultural implement, within the meaning of entry 1 of the Second Schedule to the Act, there would have been a clear indication to that effect either in the Act or in the notification effecting the amendment. The inclusion of power tiller in clear terms in entry 65 though may be viewed as an endeavour to set at rest any possible controversy with regard to its identity and entitlements as an agricultural implement, in the considered opinion of this court, the same ipso facto does not signify that at the commencement of the Act, such a recognition was neither in contemplation nor approved by the law makers. Appeal allowed.

Issues Involved:
1. Taxability of "power tillers" under the Assam Value Added Tax Act, 2003 for the period May 1, 2005 to July 28, 2005.
2. Interpretation of "agricultural implements" as per entries in the Second Schedule of the Act.
3. Legislative intent behind the inclusion of "power tillers" in entry 65 of the Second Schedule.
4. Validity of the Commissioner's order and the show-cause notice issued to the petitioner.

Detailed Analysis:

1. Taxability of "Power Tillers":
The primary issue revolves around whether "power tillers" should be taxed at 4% or 12.5% under the Assam Value Added Tax Act, 2003 for the period May 1, 2005 to July 28, 2005. The Commissioner of Taxes, Assam, had clarified that "power tillers" were taxable at 12.5% during this period as they were not explicitly included in entry 65 of the Second Schedule until July 29, 2005. Consequently, the Superintendent of Taxes issued a show-cause notice to the petitioner-firm to explain why its turnover for the specified period should not be assessed at 12.5%.

2. Interpretation of "Agricultural Implements":
The petitioners argued that "power tillers" should be considered as "agricultural implements" not operated manually or driven by animals, as per entry 1 of the Second Schedule, and thus taxable at 4%. The assessing authority, however, viewed "power tillers" as a residuary item taxable at 12.5% under Schedule V before their explicit inclusion in entry 65 of the Second Schedule. The court evaluated whether "power tillers" could be construed as agricultural implements despite their multifarious uses.

3. Legislative Intent:
The respondents contended that the inclusion of "power tillers" in entry 65 of the Second Schedule from July 29, 2005, indicated that they were not intended to be considered as agricultural implements before this date. The court examined the legislative intent and whether the subsequent inclusion of "power tillers" in entry 65 was an attempt to clarify their status rather than a change in their classification.

4. Validity of the Commissioner's Order and Show-Cause Notice:
The court scrutinized the Commissioner's order dated December 23, 2008, and the subsequent show-cause notice dated December 29, 2008. The petitioners challenged these on the grounds that the power tillers should have been taxed at 4% as agricultural implements. The court assessed the arguments from both sides, including the legislative framework and judicial precedents cited by the petitioners and respondents.

Judgment Analysis:

The court concluded that the "power tiller" should be considered an agricultural implement based on its predominant use in agricultural operations, despite its potential for other uses. The court noted that the legislative intent and the language of the Act did not explicitly exclude "power tillers" from the definition of agricultural implements before their inclusion in entry 65 of the Second Schedule. The court found that the Commissioner of Taxes' order misinterpreted the relevant provisions of the Act.

The court emphasized that the burden of proof was on the Revenue to establish that "power tillers" could not be considered agricultural implements under any conceivable reasoning. The court held that the inclusion of "power tillers" in entry 65 of the Second Schedule from July 29, 2005, did not retrospectively alter their classification for the period before this date.

Conclusion:
The court quashed the impugned order dated December 23, 2008, and the consequential show-cause notice dated December 29, 2008. The petition was allowed, and it was held that "power tillers" should be taxed at 4% as agricultural implements for the period May 1, 2005, to July 28, 2005. No costs were awarded.

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