2021 (3) TMI 29 - HC - VAT and Sales Tax

Court sets aside orders, remands tax matter for fresh consideration. Each party to bear own costs.

SINGH CYCLE STORE Versus STATE OF ASSAM AND OTHERS

SINGH CYCLE STORE Versus STATE OF ASSAM AND OTHERS - [2021] 84 G S.T.R. 465 (Gau) Issues Involved:1. Legality and validity of assessment orders and revisional orders.2. Classification of 'Cycle Seat Cover' and 'Cycle Lock' under the Assam Value Added Tax Act, 2003.3. Interpretation of the term 'parts thereof' in Entry 12 of Schedule-II, Part A of the AVAT Act, 2003.4. Correctness of the Commissioner of Taxes' clarificatory order dated 10-07-2013.Detailed Analysis:1. Legality and Validity of Assessment Orders and Revisional Orders:The petitioner challenged the assessment orders dated 20-07-2013 and the revisional orders dated 02-03-2015, which imposed VAT at 12.5% and 13.5% for the years 2009-10 and 2010-11, respectively. The petitioner argued that the items 'cycle fluids/lubricants, seat cover, and cycle lock' should be taxed at 4% and 5% as per Entry 12 of Schedule-II, Part A of the AVAT Act, 2003. The department, however, assessed these items under the Fifth Schedule, taxing them at higher rates.2. Classification of 'Cycle Seat Cover' and 'Cycle Lock':The core issue revolved around whether 'cycle seat covers' and 'cycle locks' fall under Entry 12 of Schedule-II, Part A, which includes 'Bicycle, Tricycle, Cycle Rickshaw and Tubes and Tyres parts thereof and used for Bicycle, Tricycle, Cycle Rickshaws and wheel chair.' The petitioner argued that these items are integral parts of cycles and should be taxed at the rates specified in Entry 12. The department, relying on the Commissioner of Taxes' clarificatory order dated 10-07-2013, classified these items as accessories, not parts, and thus taxed them at higher rates under the Fifth Schedule.3. Interpretation of the Term 'Parts Thereof' in Entry 12:The court examined whether the term 'parts thereof' in Entry 12 applies to all items listed or only to specific items like cycle rickshaws. The court noted that in common parlance, bicycles come with necessary parts such as handles, brakes, mudguards, pedals, bells, and seats, making them ready for use without additional fittings. Therefore, the term 'parts thereof' should include accessories to render the term meaningful for bicycles and tricycles. The court also considered that the term 'parts thereof' might be intended only for cycle rickshaws, which are often sold as frames requiring additional fittings based on customer needs.4. Correctness of the Commissioner of Taxes' Clarificatory Order:The court found that the Commissioner of Taxes' order dated 10-07-2013 lacked necessary factual findings to support the conclusion that 'cycle seat covers' and 'cycle locks' are accessories and not parts. The Commissioner introduced the term 'accessories,' which is not defined in the AVAT Act, 2003, thus overstepping the authority granted under the Act. The court emphasized that statutory provisions must be interpreted in their ordinary and popular sense, and the Commissioner cannot introduce new terminology not provided by the Legislature.Conclusion:The court set aside and quashed the clarificatory order dated 10-07-2013, the assessment orders dated 20-07-2013, and the revisional orders dated 02-03-2015. The matter was remanded back to the Deputy Commissioner of Taxes to redecide the issue afresh based on available materials and as per the provisions of law. The writ petition was allowed to this extent, with each party bearing its own costs.