2018 (2) TMI 1298 - HC - VAT and Sales Tax

Rate of tax - Classification of goods - automotive air conditioning systems - taxable at 4%or 12.5% - Held that - the goods imported by the petitioner are inputs for the manufacture of car inside the State. Therefore, the appropriate classification should be under Entry 67 of Part B to the First Schedule and not otherwise - In paragraph 13 of the counter affidavit, the respondent took a stand that the industrial input certificates issued by the purchasing dealers do not contain the entire details as per Rule 6(3)(b) of the said Rules. However, this view is incorrect, as all the relevant details have been mentioned in the industrial input certificate. This Court has no hesitation to hold that the correct rate of tax to be adopted in respect of the transactions effected by the petitioner is 4%. Petition allowed - decided in favor of petitioner.

Summary

Issues involved:
Challenge to assessment orders for the years 2007-08 to 2010-11 regarding the tax rate on the sale of compressor parts for automobile air conditioners at 12.5%.
Interpretation of industrial input certificates and their relevance in determining the applicable tax rate for goods used in manufacturing automotive air conditioning systems.

Analysis:

Issue 1: Challenge to assessment orders
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act and the Central Sales Tax Act, challenged assessment orders for the years 2007-08 to 2010-11. The respondent proposed to levy tax at 12.5% on the sale of compressor parts for automobile air conditioners. The petitioner contended that their products were industrial inputs, falling under a concessional tax rate. The respondent disagreed, insisting the goods were automobile parts, taxable at 12.5%. The petitioner argued that they complied with relevant rules and should be taxed at 4%, not 12.5%.

Issue 2: Interpretation of industrial input certificates
The petitioner submitted industrial input certificates as per Rule 6(3)(b) of the Tamil Nadu Value Added Tax Rules, 2007. The certificates detailed the goods purchased, manufactured, and their intended use in connection with manufacturing passenger cars. The respondent questioned the validity of these certificates, claiming they lacked necessary details. However, the court held that the certificates were in compliance with the rules. The court referred to a previous case to establish that any discrepancies in the certificates should not affect the selling dealer. Ultimately, the court determined that the correct tax rate for the petitioner's transactions should be 4%, not 12.5%.

Conclusion:
The High Court allowed the writ petitions, setting aside the impugned orders and remanding the matters to the respondent for reassessment at a 4% tax rate. The court emphasized the importance of industrial input certificates in determining the applicable tax rate for goods used in manufacturing automotive air conditioning systems.