2016 (12) TMI 66 - HC - VAT and Sales Tax

Tax on Mobile Crane Wire Ropes: 4% Rate Upheld

Additional Commissioner, (Vat & IT), Jaipur Versus Sukirty Vyapar And CTO, Anti Evasion, Circle-III, Jaipur Versus Prasoon Enterprises

Additional Commissioner, (Vat & IT), Jaipur Versus Sukirty Vyapar And CTO, Anti Evasion, Circle-III, Jaipur Versus Prasoon Enterprises - TMI Issues Involved:1. Classification of 'Mobile Crane Wire Ropes' for tax purposes.2. Determination of applicable tax rate under the Rajasthan Value Added Tax Act, 2003.Detailed Analysis:1. Classification of 'Mobile Crane Wire Ropes' for Tax Purposes:The primary issue revolves around whether 'Mobile Crane Wire Ropes' should be classified as part of Mobile Cranes and thus taxed at 4% under Schedule IV, or if they should be taxed under the general rate prescribed in Schedule V.The Additional Commissioner initially ruled that Mobile Crane Wire Ropes are not part of Mobile Cranes and, as they are not specified in Schedules I, II, III, IV, or VI, should be taxed under Schedule V. This decision was contested by the respondent assessee before the Tax Board, which ruled in favor of the assessee, stating that the Wire Ropes are indeed part of Mobile Cranes and should be taxed at 4%.During the proceedings, the Revenue contended that Mobile Cranes could operate without Wire Ropes and that these ropes could be used for diverse purposes, not exclusively for Mobile Cranes. They argued that the plain and simple meaning of the term should be considered, and since no specific evidence was provided by the assessee to show exclusive use in Mobile Cranes, the ropes should be taxed at the higher rate.In contrast, the respondent assessee argued that Wire Ropes are integral parts of Mobile Cranes and are used exclusively for them. They presented a catalogue showing that these items are specifically designed for Mobile Cranes, asserting that the Tax Board's decision was correct and should not be interfered with.2. Determination of Applicable Tax Rate under the Rajasthan Value Added Tax Act, 2003:The court examined various precedents to determine whether the Wire Ropes should be classified as parts of Mobile Cranes. The court referred to several judgments, including those from the Supreme Court, which provided insights into the classification of parts and accessories. For instance, in the case of Insulation Electrical (P) Ltd., the Supreme Court differentiated between parts and accessories, stating that parts are essential components without which the whole cannot function, while accessories are supplementary and not essential for functioning.Applying this principle, the court concluded that Wire Ropes are essential for the functioning of Mobile Cranes, as they are used whenever the wire becomes loose or breaks. The court emphasized that even if Wire Ropes could be used for other purposes, their primary use in Mobile Cranes makes them integral parts of the cranes.The court also cited the case of Tata Engineering & Locomotive Company Ltd., where the Supreme Court held that items like tyres, tubes, and batteries, which are essential for the operation of vehicles, should be considered as parts and taxed accordingly. Similarly, in the case of M/s Mack Springs Pvt. Ltd., leaf springs manufactured for exclusive use in motor vehicles were classified as auto vehicle parts.Based on these precedents and the specific facts of the case, the court found that Mobile Crane Wire Ropes should be classified as parts of Mobile Cranes and taxed at the rate applicable to Mobile Cranes, i.e., 4% under Schedule IV. The court dismissed the petitions, upholding the Tax Board's decision in favor of the respondent assessee.Conclusion:The court concluded that Mobile Crane Wire Ropes are integral parts of Mobile Cranes and should be taxed at 4% under Schedule IV of the Rajasthan Value Added Tax Act, 2003. The petitions by the Revenue were dismissed, and the Tax Board's decision was upheld.