2014 (4) TMI 880 - HC - VAT and Sales Tax

Rate of Tax - Imported electronic equipments Classification - The electronic equipment s imported by Assessee, whether come within the term machinery referred to in the schedule of U.P. Tax on Entry of Goods into Local Areas Act, 2007, which has come into force w.e.f. 01.11.1999 machinery Item 2 of schedule of Act, 2007 - Held that - In totality the instruments referred to above imported by assessee constitute and satisfy the term machinery and its parts (including spare parts) and, therefore, the view taken by authorities below cannot be said to be erroneous Relying upon Commissioner of Income Tax, Madras Vs. Mir Mohammad Ali, 1964 (4) TMI 12 - SUPREME Court SC held that a diesel engine itself is a machinery. The mere fact that such a device is considered to be an electronic equipment would not make any difference for the reason that the term electronic means that it is operated by flow of electrons - In common parlance the term electronic is applied to a system or appliance which is operated by a flow of electron - In McGraw-Hill, Dictionary of Scientific and Technical Terms (Second edition), the term electronic has been defined as pertaining to electron devices or to circuits or systems utilizing electron devices, including electron tubes, magnetic amplifiers, transistors, and other devices that do the work of electron tubes - This Court considered the items in question which have been imported by assessee, hence has no hesitation or doubt in holding that these items form machinery used for the purpose of transmission of voice from one place to another and this process is called telecommunication Therefore, items imported by assessee are taxable, since covered by Item 2 of the schedule of Act, 2007 - The order of Tribunal is confirmed - The revision being devoid of merit, is dismissed Decided against assessee.

Summary

Issues Involved:
- Whether the "electronic equipment" imported by the revisionist comes within the term "machinery" referred to in the schedule of U.P. Tax on Entry of Goods into Local Areas Act, 2007.

Issue-Wise Detailed Analysis:

1. Definition and Scope of "Machinery":
The core issue revolves around whether the imported electronic equipment qualifies as "machinery" under the U.P. Tax on Entry of Goods into Local Areas Act, 2007. The appellant argued that the electronic goods imported do not fall under the term "machinery" as per Item No. 2 of the schedule under the Act, 2007, and therefore should not be taxable.

2. Interpretation by Authorities:
The Deputy Commissioner (Assessing Authority) and the Joint Commissioner (Appeals) interpreted "machinery" using the Oxford Dictionary, concluding that electronic apparatus or equipment qualifies as "machinery." This interpretation was upheld by the Tribunal, rejecting the appellant's argument that electronic goods should not be considered machinery.

3. Historical and Technical Perspective:
The judgment delves into the evolution of the term "machinery," highlighting its broader scope beyond traditional mechanical devices. The court noted that modern machinery includes sophisticated electronic devices which perform tasks previously done by mechanical means. References were made to historical and technical definitions, including those from the "American Heritage Dictionary" and various scientific texts.

4. Judicial Precedents:
The court cited several precedents to support its interpretation:
- Nutley and Finn, In re (1891): Machinery includes everything that assists in production.
- Chamberlayne Vs. Collins (1894): Machinery involves mechanical means to achieve specific ends.
- Corporation of Calcutta Vs. Chairman of the Cossipore and Chitpore Municipality (1922): Machinery must be more than a collection of tools and involves mechanical contrivances generating power or directing natural forces.
- Commissioner of Income Tax, Madras Vs. Mir Mohammad Ali (1964): A diesel engine itself is considered machinery.
- K.B. Dani Vs. State of Karnataka (1979): Tractor trailers were not considered machinery, emphasizing the need for systematic arrangement and combined functioning of parts.

5. Application to the Case:
The court examined the specific items imported by the appellant, such as Multi Wall Sets, Wireless Access Systems, Solar Power Generating Systems, and others. It concluded that these items, either individually or as part of a system, fulfill the definition of "machinery" as they perform tasks beyond human physical capabilities and involve systematic arrangement and functioning.

6. Conclusion:
The court held that the imported electronic equipment qualifies as "machinery" under Item No. 2 of the schedule of the Act, 2007. The view taken by the authorities below was upheld, and the items were deemed taxable. The revision was dismissed with costs, quantified at Rs. 1000.

The judgment provides a comprehensive analysis of the term "machinery," its historical context, technical definitions, and relevant judicial precedents, ultimately concluding that the electronic equipment in question falls within the ambit of "machinery" for taxation purposes under the Act, 2007.