2025 (12) TMI 706 - HC - VAT / Sales Tax

Tax revision by revenue dismissed; generator sets taxed at 3% as power-operated machinery, not Entry 38 goods

HC dismissed the tax revision cases filed by the revenue, upholding the STAT's orders in favour of the assessee. It held that generator sets, for the ... Applicability of G.O.Ms.No.252, dated 19.05.1995 to the generators sets - Classification of supply - supply of generator sets falls under the sale contract or works contract? - main contention of the petitioner/revenue is that the generator is not a machine and is included at specific entry-38 of First Schedule and that when there is a specific entry, the same will prevails over a general entry or Government Order - HELD THAT:- The entry 38 of First Schedule items is verified and it is found that the generator has been removed from the said entry w.e.f. 01.04.1995 and as the instant cases, the assessment years are of 1995-96 and 1996-97, the entry 38 of First Schedule has no application, as the generators are removed from the said entry w.e.f. 01.04.1995. More particularly, G.O.Ms.No.1272 dated 31.12.1994 had been issued under which the generators were given concessional rates and made exigible to tax at 3% only, as all kinds of machinery propelled or operated by any kind of power or fuel were exigible to tax at 3% and it is only subsequently that G.O.Ms.No.252 dated 19.05.1995 was issued in continuation of G.O.Ms.No.1272 dated 31.12.1994. As such, the contention of the learned counsel for petitioner/revenue that the generators are under entry 38 of First Schedule is not tenable, deserves no merit in view of fact that the generators are removed from entry 38 of First Schedule only w.e.f. 01.04.1995. The Tribunal is justified in allowing the Appeals by setting aside the orders passed by the Additional Commissioner (CT) (Legal), Office of the Commissioner of Commercial Taxes, Hyderabad dated 16.11.2002 and the interference of this Court in the well considered orders of the learned STAT are unwarranted and the Tax Revision Cases filed by the petitioner/revenue are liable to be dismissed. The Tax Revision Cases are hereby dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, for the assessment years 1995-96 and 1996-97, the turnover from sale of generator sets is taxable at the concessional rate of 3% under G.O.Ms.No.1272 dated 31.12.1994 as continued/superseded by G.O.Ms.No.252 dated 19.05.1995, or at 16% under entry 38 of the First Schedule to the APGST Act. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of G.O.Ms.No.1272 and G.O.Ms.No.252 to generator sets versus taxation under entry 38 of First Schedule Legal framework 2.1 The notifications in G.O.Ms.No.1272 dated 31.12.1994 and G.O.Ms.No.252 dated 19.05.1995 are issued under Section 9(1) of the APGST Act, providing for reduction of tax in respect of specified goods. 2.2 Under G.O.Ms.No.1272, tax on 'all kinds of machinery propelled or operated by any kind of power or fuel, but excluding component parts, spare parts and accessories of such machinery used in the manufacture of goods in the State for sale, which are liable to tax in the State' was reduced to 3 paise in the rupee, subject to conditions regarding certificates from buyers and registration details of purchasing dealers. 2.3 G.O.Ms.No.252, Notification XXXVI, issued in supersession of G.O.Ms.No.1272, continues the concessional rate of 3 paise in the rupee for the same description of machinery and is deemed to have come into force with effect from 01.04.1995. Interpretation and reasoning 2.4 The Revenue contended that generator sets fall under the specific entry 38 of the First Schedule, exigible to tax at 16%, and that a specific statutory entry prevails over a general entry or a concessional Government Order. It was argued that the Sales Tax Appellate Tribunal erred in applying entry 83 and the Government Orders to allow concessional rate. 2.5 The assessee contended that for the relevant assessment years (1995-96 and 1996-97), generator sets had been removed from item 38 of the First Schedule with effect from 01.04.1995, and therefore entry 38 had no application. It was submitted that generator sets are 'machinery propelled or operated by any kind of power or fuel' and hence squarely covered by G.O.Ms.No.1272 as continued by G.O.Ms.No.252, entitling the assessee to the concessional rate of 3%. 2.6 The Court examined entry 38 of the First Schedule and found that generator sets were specifically deleted from that entry with effect from 01.04.1995. Since the assessment years in issue are 1995-96 and 1996-97, the Court held that entry 38, post 01.04.1995, does not cover generators and therefore cannot be invoked to levy 16% tax for those years. 2.7 The Court noted that under G.O.Ms.No.1272 generator sets were already made exigible to tax at 3% as they fall within 'all kinds of machinery propelled or operated by any kind of power or fuel,' and that G.O.Ms.No.252 dated 19.05.1995, issued in continuation/supersession of G.O.Ms.No.1272, maintained the same concessional treatment with effect from 01.04.1995. 2.8 In light of the deletion of generators from entry 38 with effect from 01.04.1995, the Court rejected the Revenue's argument that a specific entry prevails over the Government Orders, holding that there was, in fact, no applicable specific entry covering generators for the relevant period. 2.9 The Court accepted that generator sets, being machinery propelled or operated by power, are covered by the description in G.O.Ms.No.1272/G.O.Ms.No.252 and thus eligible for the concessional rate of 3% for the relevant assessment years, subject to the conditions in the notifications. Conclusions 2.10 Entry 38 of the First Schedule, after deletion of generators with effect from 01.04.1995, has no application to generator sets for the assessment years 1995-96 and 1996-97, and hence cannot be relied upon to levy tax at 16% on such sales. 2.11 Generator sets qualify as 'machinery propelled or operated by any kind of power or fuel' and, for the relevant period, their sales are liable to tax at the concessional rate of 3% under G.O.Ms.No.1272 as continued and superseded by G.O.Ms.No.252, subject to the conditions stipulated therein. 2.12 The reasoning of the Additional Commissioner in restoring 16% tax on generator sets by invoking entry 38 is legally untenable; the Appellate Deputy Commissioner and the Sales Tax Appellate Tribunal correctly applied the Government Orders granting the concessional rate. 2.13 The Tribunal's orders setting aside the Additional Commissioner's revision and restoring the Appellate Deputy Commissioner's orders are upheld, and the Tax Revision Cases filed by the Revenue are dismissed.