2017 (5) TMI 267 - HC - VAT and Sales Tax

Classification of goods - Hydraulic door closers - whether classified under Schedule under entry 92 fitting for doors or under VAT Schedule (v)? - levy of VAT at 4% or 12.5%? - Held that - similar issue decided in the case of State of Karnataka Vs. Sanjiv Mehra and Another 1989 (11) TMI 289 - KARNATAKA HIGH COURT , wherein door closer has been held to be machinery and also taking into consideration the other material, the Assessing Officer was of the view that the hydraulic door closers would fall under VAT Schedule (v) where a rate of 12.5% is applicable - also, specific entry 92 of the Schedule (iv) shows various parts of door fittings namely ; Stoppers, Suspender, Springs, Magic Eye, Trolley Wheels, Pulleys & Holdfasts etc but hydraulic door closers does not find place in it. Hydraulic door closers appears to be a mechanical device and as submitted by the counsel for the petitioner, it stops the speed of the door or retard the speed - Even if, one takes into consideration the common parlance test which even the Apex Court time and again in the case of classification has taken into consideration it prima-facie appears that if a person asks from the dealer about part of fitting of doors, it would certainly mean to be Stoppers, Suspender, Springs, Magic Eye, Trolley Wheels, Pulleys & Holdfasts & Channels etc. but none would give hydraulic door closers as fitting for doors. Petition dismissed - decided against petitioner.

Summary

Issues:
Assessment of tax rate for "hydraulic door closers" under VAT Schedule (iv) or (v)

Analysis:
The judgment pertains to a series of petitions challenging the tax assessment order by the Rajasthan Tax Board for the assessment years 2006-07 to 2010-11. The central issue revolves around the classification of "hydraulic door closers" for tax purposes under VAT Schedule (iv) or (v). The assessee argued that the door closers should be categorized under entry 92 of Schedule (iv) as a fitting for doors, attracting a lower tax rate of 4%. However, the Assessing Officer applied a tax rate of 12.5% under Schedule (v) based on the nature of the product and its components.

The dispute escalated through various levels of appeal, with the Dy. Commissioner (A) upholding the higher tax rate but waiving the penalty. The Tax Board also sided with the lower authorities, leading to the matter being brought before the High Court. The petitioner contended that hydraulic door closers are essential parts of doors falling under Schedule (iv) entry 92, emphasizing their role in controlling door speed to prevent damage. The petitioner also challenged the reliance on the Karnataka High Court judgment and the use of Wikipedia definitions in the assessment.

The respondent, on the other hand, argued that hydraulic door closers are distinct products with different functions, containing multiple components beyond simple door fittings. The respondent supported the tax authorities' decision based on the product's technical aspects and cited precedents to justify the classification under Schedule (v). The High Court analyzed the arguments presented by both parties, reviewed the material on record, and examined the relevant provisions of Schedule (iv) entry 92.

The Court referenced the specific entry 92 of Schedule (iv) detailing various door fittings but noted the absence of hydraulic door closers in the list. Considering the functional aspects and common understanding of door fittings, the Court opined that hydraulic door closers do not align with the components typically associated with door fittings under Schedule (iv). The Court also acknowledged the use of Wikipedia definitions as supplementary aids in understanding technical terms and commercial contexts.

Additionally, the Court referenced the Karnataka High Court judgment elaborating on the concept of machinery, which supported the classification of door closers as machinery based on its components and functions. The Court found no distinguishing feature that would warrant a departure from the conclusions reached by the lower authorities and upheld the tax assessment under Schedule (v) at 12.5%. Ultimately, the Court dismissed the petitions, finding no grounds for interference in the impugned orders, thereby affirming the tax treatment of hydraulic door closers under Schedule (v) as machinery subject to a higher tax rate.