2009 (5) TMI 888 - AT - VAT and Sales Tax

Tribunal remands case to determine tax rate for sales to Indian Railways

Indian Oil Corporation Ltd. Versus State of Kerala

The Tribunal set aside the lower authorities' orders and remanded the case for an inquiry to ascertain if the goods were sold to the Indian Railways. If ... - Issues Involved:1. Classification of goods for tax purposes.2. Applicability of tax rates on rubber goods versus engineering goods.3. Determination of whether goods supplied were railway equipment or components thereof.Detailed Analysis:1. Classification of Goods for Tax Purposes:The applicants, manufacturers of rubber and rubberized products, supplied goods to a pro forma respondent who had an order from the railways. The primary issue was whether these goods should be classified as 'rubber goods' or 'engineering goods' under the West Bengal Sales Tax Act, 1994.2. Applicability of Tax Rates on Rubber Goods versus Engineering Goods:The assessing authority levied a 12% tax on the goods, classifying them as rubber goods, not engineering goods, because the applicants sold them to the pro forma respondent rather than directly to the railways. The appellate authority and the revisional authority both upheld this classification, asserting that the goods did not qualify as engineering goods under entry No. 198(i) of Schedule IV of the 1994 Act but fell under entry No. 242, which is taxable at 12%.3. Determination of Whether Goods Supplied Were Railway Equipment or Components Thereof:The applicants argued that the goods were manufactured to railway specifications and should be classified as engineering goods, specifically as spare parts, accessories, and components of railway equipment under entry No. 198. The Tribunal noted that while engineering skill was involved in manufacturing these items, the classification depended on whether the goods were directly supplied to the railways or merely to the pro forma respondent.Tribunal's Findings:The Tribunal emphasized the importance of the phrase 'that is to say' in entry No. 198, which limits the classification to specific items listed under engineering goods. The Tribunal acknowledged that the goods required engineering skill but stressed that to qualify for the 8% tax rate, it must be proven that the goods were supplied to the railways as spare parts, accessories, or components of railway equipment.The Tribunal found merit in the applicants' argument that the goods could be considered as parts of railway equipment. However, it highlighted the need for an enquiry to confirm whether the goods were indeed sold to the railways by the pro forma respondent. The Tribunal disagreed with the applicants' alternative suggestion that the goods should fall under entry No. 146(xxix) or that entry 242 should be treated as a residuary entry, affirming that entry 242 is a specific entry for rubber goods not covered elsewhere.Conclusion:The Tribunal set aside the orders of the lower authorities and remanded the matter back to the assessing authority for an enquiry to determine if the goods were sold to the Indian Railways. If confirmed, the sales to the pro forma respondent should be taxed at 8%. The petition was disposed of with no order as to costs.Separate Judgment:PRADIPTA RAY (Chairman) concurred with the judgment.