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TMI Blog2014 (7) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of a tractor under the notification dated 15.1.2000 in view of the words “of all kinds”. The said words are of wide import and would include battery tractor - We are of the opinion that a battery is an essential component for the functioning of the tractor and is an integral part of the tractor. Consequently, a battery would be covered under the notification dated 15.1.2000. Jurisdiction of AO - reasons to believe to impose tax - The words “has reasons to believe” must not be arbitrary or irrational but must be based on reasons which are relevant and germane to the issue. The formation of the required opinion and belief by the assessing officer is a condition precedent. Without such formation, the assessing officer will have no jurisdiction to initiate proceedings under Section 21 of the Act Held that: - the assessing officer as well as the Additional Commissioner, while granting permission, was of a belief that tractor battery is liable to be taxed as an unclassified item @ 10%. Such belief was based on comparison of the notification dated 9.5.2003 wherein batteries were included as a component, parts and accessories of a vehicle, which excluded tractor and consequently had a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Harvesters of all kinds other than tyre, tube, spark plug and Tractor Trollies. M - stands for sale by the manufacturer in Uttar Pradesh. I - stand for sale by the importer in Uttar Pradesh. A perusal of the aforesaid notification indicates that parts and accessories and attachment of tractors of all kinds other than tyre, tube, spark plug and tractor trollies is taxable @ 5%. The assessing officer, on the basis of this notification dated 15.1.2000, treated sale of tractor batteries as part/accessory of a tractor and imposed 5% as tax. Under Section 3-A of the Tax Act, the State Government issued another notification dated 29.1.2001. Entry No.18 is relevant for deciding this issue, which is extracated hereunder: Sl.No. Description of goods Points of tax Rate of tax percentage 18 (i)(a) Motor vehicles including chassis of motor vehicles, but excluding light commercial vehicles mentioned in sub-clause (b) below, two wheelers motor vehicles and tractors and harvester combines. Sale by dealer to consumer or, in this case of sale through a hire purchase by the consumer. 12.00% (ii) Components, parts and accessories of vehicles, specified in clauses (i) and (iii) inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since it includes all kinds of parts and accessories and attachment of tractors except specified parts and accessories and attachments which have been specifically excluded whereas in the notification dated 29.1.2001, as amended on 9.5.2003, "battery" has been included as a component, part or accessory for motor vehicles only. Based on Entry No.18 of the notification dated 9.5.2003, a circular dated 22.5.2007 was issued by the Commissioner of Trade Tax indicating that in view of the inclusion of "battery" in the notification dated 9.5.2003 and non-inclusion of battery in the notification dated 15.1.2000, the tractor battery should be subjected to tax as an unclassified item @ 10%. Section 22 of the Act provides that if the assessing authority has reasons to believe that the whole or any part of the turnover of a dealer for any assessment year or part thereof has escaped assessment to tax and has been under assessed to tax at a rate lower than that at which it was assessable under the Act, the assessing authority after issuing a notice to the dealer and after making such inquiry re-assess the tax. However, such reassessment has to be made within two years. Proviso to sub-Section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tractor. The learned senior counsel submitted that the words "other than" used in Entry 46 gives a specific exclusion to certain parts and accessories and attachments which will not be taxed @ 5% and such exclusion does not include the word "battery". Consequently, the word "battery" would be included as a part, if not, as an accessory to a tractor, which would be taxable @ 5%. The learned senior counsel further contended that the notification dated 29.1.2001 as amended by 9.5.2003 is not applicable as it is only relates to motor vehicles other than tractors. The inclusion of the word "battery" as component parts or accessory of a motor vehicle is only illustrative and is not exhaustive, whereas the exclusion of specified articles under the notification dated 15.1.2000 is specific and exhaustive. If the legislature had the intention of excluding "battery" in the notification dated 15.1.2000, it would have specifically excluded in that notification. By not doing so, battery would be included as a part or as an accessory of a tractor. On the other hand, Sri C.B.Tripathi, the learned counsel for the State of U.P. submitted that the notification dated 15.1.2000 is required to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., (2007) 291 ITC 500 (SC), held that at the stage of issuance of notice the only question to be considered was whether there was relevant material on which a reasonable person could have formed the requisite belief. In M/s Rubber Chem Sadabad Gate Hathras vs. The Additional Commissioner Grade-I, Commercial Tax, Aligarh Zone, Aligarh and another, decided on 15.3.2014, in Writ Petition No.1045 of 2009, the Division Bench of this Court, after analysing various decisions of the Supreme Court, held- "On a plain and simple reading of Section 21, it is crystal clear that where a dealer has been assessed to tax at lower, then, it is a case of escape assessment. Rider is that such Assessing Authority should have reason to believe that whole or part of turnover has escaped assessment. The condition precedent, namely, the formation of opinion on the part of Assessing Authority that there is reason to believe that the case in which the action is contemplated falls within the ambit of at least one of the several contingencies mentioned under Section 21. The reason to believe must have rational connection or life linked between the material coming in possession of Assessing Authority and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer as well as the Additional Commissioner, while granting permission, was of a belief that tractor battery is liable to be taxed as an unclassified item @ 10%. Such belief was based on comparison of the notification dated 9.5.2003 wherein batteries were included as a component, parts and accessories of a vehicle, which excluded tractor and consequently had a reasonable belief and formed an opinion that non-exclusion of battery in the notification dated 15.1.2000, which related to parts and accessories and attachments of tractor would mean that tractor battery cannot be included in the notification dated 15.1.2000 and, therefore, has to be treated as an unclassified item. Further, the belief was formed also on the basis of the circular dated 22.5.2007 issued by the Commissioner, which is binding upon the subordinate authorities. The Court is of the opinion, that such belief forming an opinion that whole or any part of the turnover of a dealer had escaped assessment of tax is not based on any rational basis nor the belief is germane to the issued involved nor such reasons have a nexus with the issue involved. In Commissioner of Commissioner of Sales Tax vs. Banar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Society Limited vs. The State of Tamil Nadu, 1983(52)STC 343, a Division Bench of the Madras High Court, while analysing the meaning of the words "spare parts", held that when a person purchase a battery to replace an existing battery, the said battery is a spare part. In Vikas Traders vs. The State of Gujrat, 1976(37) STC 163, a Division Bench of the Gujrat High Court held, that battery is a component part of the motor vehicle. The Division Bench held, that a battery is an integral part to constitute the whole motor vehicle as without a battery it would be ceased to be a motor vehicle. From the aforesaid decisions, it is clear, that various Courts have held that battery is a part of a vehicle. In Mehra Brothers Vs. Joint Commercial Officer, Madras, 1991(1)SCC 514, the Supreme Court analayse the word "accessory" under the Sales Tax Act holding that the term "accessories" is used in the Schedule to describe goods which may have been manufactured for use as an aid or addition. The Supreme Court held that accessory is an object or device that is not essential in itself, but that adds to the beauty, convenience or effectiveness of something else. Similar view was reiterated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cit, which leaves no room for doubt that battery is an essential part of a tractor requiring it to be taxed @ 5%. The Court is of the opinion, that formation of the opinion by the authority was a clear case of total nonapplication of mind to the relevant issue while granting permission to initiate the reassessment proceedings. The order of the Additional Commissioner granting permission under the proviso to Section 21(2) of the Act was based on non-application of mind and cannot be sustained. The issuance of notice under Section 21 of the Act by the assessing authority based on such reasons was patently illegal. The circular dated 22.5.2007 is binding on the subordinate authorities. This circular is again based on the same reasoning that battery is not been mentioned in the notification dated 15.1.2000 whereas the notification dated 9.5.2003 includes battery and, consequently, the Commissioner of Trade Tax issued the circular directing the authorities to treat the battery as an unclassified item. This circular is patently illegal and has been issued without any application of mind. Such circular is in gross contravention to the clear and explicit Entry No.46 in the notification d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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