2015 (11) TMI 1145 - HC - VAT and Sales Tax

Levy of higher rate of tax on purchase turnover - Section 3 (5) of the Tamil Nadu General Sales Tax Act - benefit of concession rate of duty - Held that - To appreciate the case of the appellant, it is essential to look into Section 3 (5) of the Act on which heavy reliance is placed by the learned counsel for the appellant. A reading of Section 3 (5) of the Act makes it clear that the tax payable by a dealer in respect of sale of goods mentioned in the Eighth Schedule to any other dealer for installation and use in his factory site situate in the State for the manufacture of any goods shall be @ 3% on the turnover relating to such sales. - As seen from the documents available on record, when the original authority and the appellate authority accepts that those air driers are installed in the factory site situate in the State for the manufacture of any goods, it only means that the goods in question should be installed in the factory site in the course of manufacture of any goods. There is no intentment of actual use of the goods in the manufacture. The words installation of in his factory or use in his factory cannot be misread as to be used as inputs in the manufacture of goods. They are machinery used by the factory at site for manufacture of goods. - requirement as envisaged under Section 3 (5) of the Act is fully satisfied in this case. The goods are installed and used in the factory site. Therefore, the assessee s contention that he is entitled to concession rate of tax at 3% is justified and is liable to be allowed. The Tribunal has erred in rejecting the contention of the assessee that it is entitled to the concessional rate of tax. - Decided against Revenue.

Summary

Issues:
Levy of higher rate of tax on purchase turnover of air drier based on Form-XVII Declaration under Section 3(5) of the Tamil Nadu General Sales Tax Act.

Analysis:

Issue 1: Levy of Higher Tax Rate
The appellant, a company engaged in manufacturing tractor parts, purchased an air drier using Form-XVII Declaration, seeking a concessional tax rate of 3%. The Assessing Officer assessed the purchase turnover of the air drier at 12%, leading to a demand for a differential tax rate of 9%. The Appellate Assistant Commissioner granted relief on the air drier, reducing the tax rate to 3% based on the Form-XVII Declaration. However, the Tribunal reversed this decision, considering the air drier as not a raw material component but an instrument to control factory room temperature. The Tribunal upheld the Assessing Officer's decision, imposing a 12% tax rate. The Court examined whether the air drier qualified for the concessional tax rate under Section 3(5) of the Act.

Issue 2: Interpretation of Relevant Provisions
The appellant argued that the air drier, listed in Form B under capital goods, warranted a 3% tax rate based on Section 3(5) of the Act. Section 3(5) mandates a 3% tax rate for goods mentioned in the Eighth Schedule used for manufacturing. The Court analyzed the provision, emphasizing that goods installed in the factory site for manufacturing qualify for the concessional rate, irrespective of their direct use in production. The Tribunal's comparison of the air drier to an air conditioner was deemed irrelevant, as the air drier's function of cooling compressed air for manufacturing aligned with the Eighth Schedule's definition of machineries worked by various power sources.

Conclusion
The Court concluded that the appellant was entitled to the concessional tax rate of 3% for the air drier purchase, as it satisfied the requirements of Section 3(5) of the Act. The Tribunal's decision was overturned, and the appellant's appeal was allowed, setting aside the Tribunal's order. No costs were awarded in this matter.