Works-contract machinery classification under VAT: a loader remained within the specific entry despite being a motor vehicle.

Machinery used in execution of a works contract fell within Entry 35 of the Gujarat VAT notification covering machinery, including parts and accessories, used for such execution. A loader was treated as machinery for works-contract use, and its character as a motor vehicle did not, by itself, remove it from the specific entry in the absence of a separate motor-vehicle entry. The later amendment excluding machinery in the form of, or mounted on, a motor vehicle was held to be a substantive change and not merely clarificatory, so it did not apply retrospectively. The loader was therefore covered by Entry 35 and not the residuary entry.

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Issues: Whether construction equipment in the nature of a loader, used in execution of works contract, falls within Entry 35 of the notification issued under Section 5(2) of the Gujarat Value Added Tax Act, 2003, or is excluded from that entry and liable to be assessed under the residuary entry.

Analysis: The relevant statutory scheme treated as sale the transfer of property in goods involved in execution of a works contract, and Entry 35 covered machinery, including parts and accessories, used in such execution. The equipment was found to be machinery used for works contract. The fact that it was also a motor vehicle was held to be immaterial in the absence of a specific entry for motor vehicles, because its essential character as machinery used in works contract remained unchanged. The subsequent amendment introducing an exclusion for machinery in the form of a motor vehicle or mounted on a motor vehicle was treated as a substantive change, not as declaratory or clarificatory, and therefore did not apply retrospectively.

Conclusion: The loader was covered by Entry 35 and not by the residuary entry. The issue was decided in favour of the assessee and against the State.

Ratio Decidendi: Where machinery is used in execution of a works contract, its mere identity as a motor vehicle does not take it out of the specific entry covering such machinery, and a later exclusionary amendment will not operate retrospectively unless the legislature clearly so provides.

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