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TMI Blog2013 (7) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... ntra- State and not inter-State sale - Decided against assessee. Exemption from VAT - Agricultural implement - Manually operated or animal driven - Held that:- through the definition of device, it is an instrument designed to carry out a particular or specific purpose. Sprinkler serves the purpose of sprinkling water so it is a device in that sense - if the hairline difference between the two is ignored then it can be regarded implement & also if it is linked with the purpose it serves i.e. agricultural process - it has a direct nexus with the irrigation process. So it is an agricultural implement - the ‘sprinkler’ is not an agricultural implement nor it is driven manually or by animal - No eligible for exemption - Following decisions of Bharat Engineering & Foundry Works Vs. The U.P. Government [962 (10) TMI 45 - ALLAHABAD HIGH COURT] and Delta Engineering Co. Pvt. Ltd. Vs. Commissioner Income Tax [1963 (4) TMI 49 - ALLAHABAD HIGH COURT] - Decided against assessee. Whether Term and Condition No. 17 of Annexure PC relating to construction of Poly Houses and Installation of Micro Irrigation Systems of Part-A and Part-B of the Pandit Deen Dayal Kisan Bagwan Samridhi Yojana is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of Poly Houses and Installation of Micro Irrigation Systems of Part-A and Part-B of the Pandit Deen Dayal Kisan Bagwan Samridhi Yojana, stood waived as being directive and not mandatory so far as the conduct of the business by the petitioner is concerned and in the alternative to quash the same as being violative of the Principles enshrined in Article 14, 19(1)(g) and Article 301 of the Constitution of India. 2. The impugned order dated 28th January, 2013 (Annexures PAB collectively) were passed by Appellate Authority-cum-Deputy Excise and Taxation Commissioner (Central Zone), Mandi, District Mandi, H.P., affirming the orders passed on 5.7.2012 by Assessing Authority for the assessment years 2009-10, 2010-11 and 2011-12 (Annexures PH, PJ and PK) respectively along with notices Annexure PE, dated 2.3.2013 issued under Section 37 of The Himachal Pradesh Value Added Tax, 2005 (in short called VAT Act hereinafter) and Annexure PF, dated 2.3.2013 issued under Section 21 of the VAT Act . Besides this, the petitioner has also sought directions for declaring the term and condition No. 17 of Annexure PC relating to construction of Poly Houses and Installation of Micro Irrigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to approach the GRA for redressal of their grievances and if any person was further aggrieved of the directions issued by the GRA, he could have approached the High Court after full fledged adjudication of the factual issues by the GRA. Kanaiyalal Lalchand Sachdev and others Vs. State of Maharashtra and others (2011) 2 SCC 782. Paragraph 23 is reproduced herein below:- 23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd. (2003) 3 SCC 524 : 2003 SCC (Cri) 762, Surya Dev Rai v. Ram Chander Rai(2003) 6 SCC 675 and SBI v. Allied Chemical Laboratories(2006) 9 SCC 252.) 4. Learned counsel for the petitioner, however, has humbly submitted at the outset that the petitioner is engaged in the manufacturing of various agricultural relating irrigation equipment/systems such as sprinklers, drip irrigation system etc. and supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om its local office at Mandi, H.P., however, the petitioner has been avoiding payment of Value Added Tax (VAT) payable under VAT Act and the Rules framed therein under the garb of treating the transaction of exempted goods being made in inter-State trade. 6. The assessing officer had made survey of the business premises of the petitioner Company and had issued notices and has made assessments for the years, 2009-10, 2010- 11 and 2011-12 (Annexures PH, PJ and PK), raising demand of VAT with interest and penalty vide assessment order dated 5.7.2012 for respective three years. The contention of the petitioner that it is supplying tax free manually operated agricultural implements, was not accepted by the assessing officer, as the same was not treated as agricultural implement manually operated or animal driven and the assessing officer has held that complete irrigation system installed by the petitioner Company required additional materials like pipes, joints, sockets, sprinkler etc. Being aggrieved, the petitioner preferred appeals No. VAT-M-18-1920. The petitioner also preferred writ petition No. 10200 of 2012, which was disposed of on 4.12.2012, by this Court (DB) with direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin 15 days from the date of empanelment. , provided under the terms and conditions to be followed/observed by the petitioner-Company short listed on the basis of technical and financial bids to act as service provider for construction of Poly Houses and installation of micro irrigation systems i.e. Part-A and Par-B under Pt. Deen Dayal Kisan Bagwan Samridhi Yojna , such condition is an impediment in carrying out the installation of micro irrigation system under Yojna , as such, be declared as ultra virus. (viii) Almost every homeowner in North America spends some amount of time and money providing water to outdoor plants by accomplishing in two ways: 1. Manual irrigation with hoses, nozzies, and sprinklers. 2. Clock driven in-ground automatic irrigation. There are hybrids of these two such as an in-ground sprinkler system that is manual operated or an above ground hose system that is clock driven, but these systems are uncommon. Many new homes come equipped with some form of clock driven automatic irrigation because this is a popular amenity that buyers have come to accept. Manual irrigation is more time and labour intensive and requires regular attention and vigilance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground surface, somewhat resembling rainfall, is known as sprinkler irrigation technique. Himachal Pradesh is a hilly state and the agriculture land ere is mostly on slops with natural gradient and therefore water for irrigating the fields from various sources travels from top to bottom, with the force of gravity, through water channels locally known as Kuhl . The use of Sprinklers by farmers for irrigating their fields saves up to 50% water. Not only the surplus water could be utilized elsewhere but irrigating using Sprinklers also limits soil erosion from the fields. In addition, the farmer gets increased and improved yield. Typically, for operation of Sprinklers, a tank has to fill with water using the traditional water channels described above. The outlet Pipes, made as per IS 14151 (Part-II), i.e. Portable Sprinkler pipes are then connected from this Water Tank and laid till the field where they are connected to the Sprinkle heads. Upon opening the outlet, water flows to the Sprinkler heads which start irrigating the field. Once the required irrigation has been done in a particular area of the field, the fully portable Pipes/Sprinklers can be easily relocated for irrigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the company s registered office and situated in another State, where manufacturing of goods was being done and accordingly dispatch of goods was made to the branch office and branch office delivered the goods to the buyer, raising bills and receiving sale price, such transaction was treated to be inter- State sale. (b) In reference to the observations made in State Trade Corporation of India Ltd. and another vs. The State of Mysore and another, AIR 1963 SC 548, paragraphs 9, 10 12, the present transaction of the petitioner was said to be inter-State transaction. (c) The learned counsel for the petitioner has referred and relied upon the decision of Hon ble Supreme Court in M/s Hyderabad Engineering Industries Vs. State of Andhra Pradesh, 2011(4), SCC 705. The relevant paragraph 48 is quoted below:- "48. Section 2(g) of the Central Act defines the meaning of the expression `sale'. This expression was explained by this Court in Balabahagas Hulsachand Vs. State of Orissa (1976) 37 STC 207 at page 213. This Court stated that the words `Sale of goods' used in this Section includes `an agreement of sale' as such an agreement is an element of sale and is also an essential in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patched from outside the State of West Bengal to any place in West Bengal was also brought on record. 13. Reference was also made to the certificate issued by the Joint Commissioner, Income Tax, West Bengal under Section 206C of the Income Tax Act, 1961 (in short the 'Income tax Act') to the Corporation to the effect that the respondents would be utilizing the tendu leaves for the purpose of manufacture and not for trade purpose and, therefore, authorized the Corporation not to collect tax at source in terms of Section 206C of the Income Tax Act. 14. Though mere knowledge about the ultimate destination cannot be sufficient, yet cumulative effect of the factual scenario has to be considered. 15. At this juncture, it is relevant to take note of a few decisions on the question of inter-State sale. 16. Strong reliance was placed by learned counsel for the State on a decision of this Court in Balabhagas Hulaschand v. State of Orissa (1976 (2) SCC 44), more particularly, the position highlighted at page 52 which reads as follows: "12. Furthermore, we can hardly conceive of any case where a sale would take place before the movement of goods. Normally what happens is that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel contends that a concluded sale must necessarily take place in the other State and not in the State from which the goods emanate. According to him, a concluded or a completed sale must follow the movement of goods and should not precede. If a purchase or sale is complete in the State from which the goods emanate, he says, it can never be an inter-State purchase or sale. We cannot accede to this understanding of the learned counsel. The said observations, no doubt rather widely worded, must be understood in the context of the question that arose for consideration in that case viz., whether an agreement of sale is included within the definition of 'sale' as defined in the Central Sales Tax. Be that as it may, the true position has since been explained in the later decision in Khosla and Co. It is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods, or for that matter, takes place while the goods are in transit. What is important is that the movement of goods and the sale must be inseparably connected. The ratio of Balabhagas is this: if the goods move from one State to another in pursuance of an agreement of sale and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n but the Court declined to do so. In a recent decision of this court in Oil India Ltd. v. The Superintendent of Taxes (1975 (3) SCR 797) it was observed by Mathew, J., who spoke for the Court, that: (1) a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in the goods passes; (2) it is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement; and (3) it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale (page 801 SCC p.737, para 9). The learned Judge added that it was held in a number of cases by the Supreme Court that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale, then the sale is an inter-State sale. xx xx xx xx 17. This decision may be usefully contrasted with another decision between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, a plough which is driven by oxen or horses would be regarded as an agricultural implement. Similarly, a hoe or a spade would be agricultural implements. However, a bullock cart which is used for carrying the agricultural produce from the farm to the market or the sugar factory cannot, in our opinion, be regarded as an agricultural implement, because in common parlance it would not be regarded by people as an implement. A bullock cart is surely not a tool, though the plough which it pulls (for furrowing the land) is certainly a tool and therefore, an agricultural implement. 18. Before parting with this case, we would like to say that it is deeply regrettable that in our Courts of law, lawyers quote Maxwell and Craies but nobody refers to the Mimansa Principles of Interpretation. Today our socalled educated people are largely ignorant about the great intellectual achievements of our ancestors and the intellectual treasury they have bequeathed us. The Mimansa Principles of Interpretation is part of that intellectual treasury, but it is distressing to note that apart from a reference to these principles in the judgment of Sir John Edge, the then Chief Justice of Allahabad High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it stood prior to the amendment. The Tribunal rightly held that if belt pulley is used in a tractor and sales tax is levied on the sale of tractor no separate sales tax is levied on belt pulley. We do not propose to view the matter from this angle. We must examine whether a belt pulley attachment when sold as a spare part would be comprehended in Entry 34 which sets out agricultural implements exempted from the levy of sales tax. Obviously as stated earlier belt pulley attachment which can be used in various mechanical appliances or devices by itself cannot be said to be an agricultural implement. To comprehend it in the generic term "agricultural implement", we would have to stretch the language to impermissible limit of breaking it. (c) In Parmeshwar Lal Bihani Vs. Commercial Tax Officer, (2000)9 SCC 259, wherein in absence of evidence regarding the meaning of the entry in question in common parlance and understanding, the entry interpreted by reference to the plain language thereof. Further relying on Mahavir Aluminium Limited Vs. Controller of Central Excise Jaipur, (1999)6 SCC 65, it has been submitted that the sprinkler falls under the category of agricultural implemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner-Company, as such, the Department of agriculture of State of Himachal Pradesh is a necessary party and non-joinder of such party is an impediment factor, whereby the prayers of the petitioner are to be rejected. In view of the decision of Hon ble Supreme Court in Sales Tax Officer, Jodhpur and another Vs. Shiv Ratan G. Mohatta, (1965) 16 STC 599, wherein it is held that it is not the object of Article 226 of Constitution to convert High Courts into original/appellate authorities whenever the petitioner/assessee chose to attack an assessment order on the ground that a sale was exempted from tax. The Department of Agriculture has empanelled the petitioner to install micro irrigation system on the fields of farmers of Himachal Pradesh under certain conditions. The sale is to be completed after satisfaction of farmers and PIA (Officer s of Agriculture Department) in the State of Himachal Pradesh. As per condition No. (8), the installation cost as well as component cost approved for different types of micro irrigation system are inclusive of all taxes and carriages of materials and the company was bound to generate bills including VAT and invoices to the farmers after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.- Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. (c) Section 6 of the Central Sales Tax Act, 1956 deals with liability to tax on inter-State sales. (d) Section 2(v) of the H.P. VAT Act, 2005 defines the sale as below:- sale means any transfer of property in goods for cash or for deferred payment or for any other valuable consideration other than a mortgage, hypothecation, charge or pledge, and includes (i) the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) the delivery of goods on hire-purchase or any system of payment by installments; (iv) the transfer of the right to use any goods for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te at the time when delivery is taken from such carrier or bailee. Explanation II clarifies that when the movement of goods commences and terminates in the same State, the movement of goods will not be deemed to be from one State to another merely because of the fact that in the course of such movement, the goods pass through the territory of any other State. (c) For a sale to be in the course of inter-State trade or commerce under Section 3(a), the two conditions must be fulfilled. There must be sale of goods. Such sale should occasion the movement of the goods from one State to another. A sale would be deemed to have occasioned the movement of the goods from one State to another within the meaning of clause (a) of Section 3 of the Act when the movement of those goods is the result of a covenant or incidence of the contract of sale, even though the property in the goods passes in either State. With a view to find out whether a particular transaction is an inter-State sale or not, it is essential to see whether there was movement of the goods from one State to another as a result of prior contract of sale or purchase. 14. Undisputedly, petitioner s Warehouse and manufacturing u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities of components and the amount of Rs.10,780/- has been charged from Sh. Madan Lal. In all these bills and invoices local address of the petitioner Company has been given as Nagchala, Mandi and the completion certificate of the installation of sprinkler along with other equipments has also been counter signed by the Sub Divisional Soil Conservator, Shimla. Such records also reveals that the transaction in question was intra State, but not inter-State. In these circumstances, Section 3 of The Central Sales Tax Act is not attracted. 15. The analysis of documents no doubt reveal that the petitioner-Company has brought the goods from Gurgaon (Haryana) to Mandi Branch, in the name of Sub Divisional Soil Conservation Officers Agriculture Department and then supplied / installed the irrigation systems in the fields of different farmers/beneficiaries under the Yojna and the petitioner- Company received 80% cost of material as subsidy from the department of Agriculture and 20% cost from farmers / beneficiaries. The petitioner-Company has found to have been charged local taxes from the farmers, as evident from the invoices, which has been issued inclusive of all taxes from the bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular specific whereas, while studying the definitions of Implement general phrases like work purpose have been used which lead us to derive a conclusion that device is something which is more specific, not general the device can be used to achieve some or only one particular purpose. On the other hand Implements are those which can be used in any purpose or work which can be done through them. Implement is used in most generic sense e.g. A knife is a well known implement of kitchen but number of times used outside it, not only for the purpose it was meant to be but also for those purposes which are not even intended to be. On the other hand, regarding device we can have an example of watch which can only be used to confirm what time it is . The phrase Implement is inclusive and not exhaustive, as that of device. (d) WHETHER SPRINKLER IS IMPLEMENT OR DEVICE:- Sprinkler According to American Heritage Dictionary of English:- (i) One that sprinklers especially (a) an outlet on a sprinkle system. (b) A device with perforations through which water issues from a house to sprinkle a lawn. (ii) A sprinkle system. According to Collins English Dictionary: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans the apparatus or instruments employed in agriculture. Merely because water pumped out from wells by means of the water pumps can be used for irrigation, it cannot be said that they are instrument employed in agriculture. The Bharat Engineering Foundry Works case (supra) was considered and it was observed that in that case Court dealt with the meaning of agriculture and agricultural implement and stated that any implement that is used in an agricultural process is an agricultural implement. Pumping water from well is not by itself an agricultural process. We appreciate that irrigating agricultural land is an agricultural process or operation, but merely because water pumped out from well by way of water pump may be used for irrigation it cannot be said that pumping put water by means of pump is itself an agriculture operation or process. Actually Agricultural process or operation will start after water has been pumped out and stored, it will start when it is taken out from the storage tank towards the land to be irrigated. The case of Persian Wheel may be different because there it may be used direct i.e. without being stored or collected for irrigating land. A Persian w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject s kinetic energy or potential energy can increase with increasing mass. A large river system has great mass, elevation and motion and therefore, can be a tremendous source of energy. So it is the energy produced by moving water i.e. kinetic energy which ultimately result into rotation of sprinkler. The inference thus is that it is not animal driven or manually operated. In order to know whether sprinkler is an agricultural implement- if so whether taxable under H.P. VAT Act or not. When we go through the definition of device, we come to know that it is an instrument designed to carry out a particular or specific purpose. Sprinkler serves the purpose of sprinkling water so it is a device in that sense. However, if we ignore the hairline difference between the two then it can be regarded implement also if we link it with the purpose it serves i.e. agricultural process as narrated in Bharat Engineering Case (supra) and Delta Engineering Co. case (supra), whereby sprinkler is an agricultural implement which is used for irrigation, which is one of the agricultural process falling between ploughing till harvesting. On the other hand, it has a direct nexus with the irri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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