1996 (7) TMI 505 - AT - VAT and Sales Tax

Tribunal Sets Aside Order, Declares Leaf Springs Not Taxable as Motor Vehicle Parts.

The Tribunal set aside the impugned order and proceedings under Section 12 of the RST Act, declaring leaf springs as subject to the general tax rate of ... - Issues Involved:1. Applicability of Section 12A of the Rajasthan Sales Tax Act, 1954.2. Classification and tax rate applicable to 'spring leaves' or 'leaf springs.'3. Binding nature of the Board of Revenue's decision.4. Maintainability of the application before the Tribunal.5. Infirmities in the impugned order.6. End use and classification of goods under sales tax law.Detailed Analysis:1. Applicability of Section 12A of the Rajasthan Sales Tax Act, 1954:The application was filed under Section 12A of the RST Act, 1954, which allows for the determination of disputed questions regarding tax liability. The Additional Commissioner made an order determining the tax rate on 'spring leaves' purchased by the non-applicant No. 4. The Tribunal noted that the applicants were not parties to the original proceedings and thus could not appeal or revise the order under the RST Act, 1954. The Tribunal held that the application was maintainable under Section 8 of the RTT Act.2. Classification and Tax Rate Applicable to 'Spring Leaves' or 'Leaf Springs':The core issue was whether 'spring leaves' should be taxed as motor parts at 12% or as general goods at 10%. The Additional Commissioner had classified them as motor parts, leading to a 12% tax rate. The Tribunal examined the relevant notification and dictionary definitions, concluding that 'leaf springs' are used in various vehicles and not exclusively in motor vehicles. Therefore, they should be taxed at the general rate of 10% under entry No. 105.3. Binding Nature of the Board of Revenue's Decision:The Tribunal emphasized that the decision of the Board of Revenue in Kotah Steel Rerolling Mills (P) Ltd. held that laminated springs were neither motor parts nor iron and steel. This decision had a binding effect on the departmental authorities. The Additional Commissioner's failure to distinguish this decision or provide reasons for deviating from it was a significant infirmity in the impugned order.4. Maintainability of the Application Before the Tribunal:The Tribunal overruled the preliminary objection regarding the availability of statutory remedies. It held that the applicants could not have availed of the remedy of appeal as they were not parties to the original proceedings. The Tribunal found that the application was maintainable under Section 8 of the RTT Act.5. Infirmities in the Impugned Order:The Tribunal identified several infirmities in the impugned order, noting that it was not a speaking order and lacked reasons for classifying the goods as motor parts. The Additional Commissioner failed to provide any material evidence to support this classification. The Tribunal concluded that the impugned order deserved to be set aside due to these deficiencies.6. End Use and Classification of Goods Under Sales Tax Law:The Tribunal reiterated the settled principle that the end use of goods is not decisive in their classification under sales tax law. The fact that non-applicant No. 4 used the leaf springs in motor vehicles was immaterial, as leaf springs have multiple applications. The Tribunal cited several High Court decisions supporting this view, including Porritts & Spencer (Asia) Ltd. v. State of Haryana and New Prasanthi Automobiles Co. v. State of Kerala.Conclusion:The Tribunal set aside the impugned order and the proceedings initiated under Section 12 of the RST Act. It declared that leaf springs were covered under item No. 105 of the notification dated March 4, 1992, and were subject to the general tax rate of 10%. The Tribunal also directed that sales made in accordance with the impugned order should not be reassessed based on this judgment. It was further declared that sales of leaf springs are not exigible to tax as motor vehicle parts. The writ petition was allowed.