2014 (6) TMI 762 - HC - VAT and Sales Tax

Determination of rate of tax - Tax on sale of gutkha - Held that - in Section 8 of Andhra Pradesh General Sales Tax Act, 1957, there was a provision that a dealer, who deals in the goods specified in the Fourth Schedule thereto, shall be exempt from tax thereunder in respect of such goods. Therefore, all the goods, which were specified in Fourth Schedule of the Andhra Pradesh State statute, levying tax on sales of goods in the State of Andhra Pradesh, were exempted from tax by virtue of a specific provision contained in that statute i.e. Section 8 of Andhra Pradesh General Sales Tax Act. There was an entry no.7 in Fourth Schedule of Andhra Pradesh statute, which mention the word tobacco . There was an explanation also therein, which says that goods mentioned in Entry 7 shall be goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, but does not include goods where no additional duties of excise are levied under that Schedule . - tax imposed upon sale of Gutkha in the case in hand treating it to be unclassified item and imposing tax at the rate of 10% is absolutely valid and correct. - Decided in favor of revenue. Sale of used generator in running condition - whether to be construed as old discarded and unserviceable machinery - held that - Words discarded, unserviceable, obsolete should be read ejusdem generis with the word old so as to apply aforesaid notification to such machineries which are virtually unusable, unworkable or unfunctional. However, I do not find any reason to read all these terms ejusdem generis since all these terms have a distinct meaning. Moreover, use of the word or between unserviceable and obsolete clearly shows intention of State that all these words have been used to cover different situations. If an old machinery is sold even if it is in running and usable condition, in my view, it would be covered by entry 29. Therefore, question D is answered in favour of Revenue by holding that sale of generator is covered by entry 29 of notification dated 15.1.2000 as amended by notification dated 17.02.2000 w.e.f. 17.1.2000 - Decided in favor of revenue. Rate of tax on sale of old and used Generator - Held that - rate of tax would be only 5% and not 8% - Decided in favor of assessee.

Summary

Issues Involved:
1. Taxability of 'Gutkha' under U.P. Trade Tax Act, 1948.
2. Rate of tax applicable to the sale of a generator.

Issue-wise Detailed Analysis:

1. Taxability of 'Gutkha' under U.P. Trade Tax Act, 1948:

A. Whether 'Gutkha' is a declared good under Section 14(ix) of the Central Sales Tax Act:
The applicant argued that 'Gutkha' should be treated as a declared good under Section 14(ix) of the Central Sales Tax Act, based on the Supreme Court's decision in Kothari Products Ltd. v. Government of Andhra Pradesh. The Court clarified that 'Gutkha' is a form of 'Pan Masala' containing tobacco. The Court examined various notifications and amendments, particularly noting the notification dated 26.6.1997, which excluded "Pan Masala containing tobacco" from the term "all products of tobacco." Therefore, during the assessment year 2001-02, 'Gutkha' was taxable as an unclassified good.

B. Whether the absence of a notification regarding declared goods exempts 'Gutkha' from tax:
The Court examined the absence of specific notifications exempting 'Gutkha' from tax under the U.P. Trade Tax Act, 1948. The Court found that the state government had issued notifications excluding "Pan Masala containing tobacco" from tax exemptions. Therefore, 'Gutkha' was not exempt from tax during the relevant period.

C. Justification of imposing 10% tax on 'Gutkha':
The Court upheld the imposition of a 10% tax on 'Gutkha' as an unclassified good. The Court emphasized that 'Gutkha' was not covered by any specific entry or exemption under the U.P. Trade Tax Act, 1948, and thus, the tax rate of 10% was valid.

2. Rate of tax applicable to the sale of a generator:

D. Whether the generator was correctly treated as 'old discarded and unserviceable machinery':
The Court examined whether the sold generator was in "discarded and unserviceable condition." The Court found that the generator was in running condition and could not be classified as "obsolete." However, it was considered "old machinery."

E. Justification of imposing 8% tax on the sale of the generator:
The Court referred to the notification dated 15.1.2000, which was amended by notification dated 17.2.2000, specifying a 5% tax rate on "old, discarded, unserviceable or obsolete machinery." The Court concluded that the generator, being old but functional, was covered under this notification. Therefore, the applicable tax rate was 5%, not 8%.

Conclusion:
The Court upheld the 10% tax on 'Gutkha' as an unclassified item and modified the tax rate on the generator sale to 5%. The revision was partly allowed, and the Tribunal was directed to pass a consequential order based on these findings. There was no order as to costs.